When Kathryn Jenkins first looked at her cul-de-sac at Cascades, the fledgling planned community in eastern Loudoun County, all she saw was a sea of red mud, a few empty homes and almost no neighbors.

That was last December. Red mud still marks her driveway, but now a bright green lawn surrounds her sprawling two-story home and Cascades's first neighborhood has at least 30 other families.

From all the mess last year, there emerged a group of affluent professionals intent on creating a community and making friends, she said. They've already had a Fourth of July celebration and a block party.

"We're sort of a close-knit bunch," said Jenkins, who works part time at the Cascades visitors center. "I guess because we sort of feel like pioneers."

Although only about 100 people live there now, Cascades is one of the Washington metropolitan area's most ambitious projects. Plans call for housing for 30,000 people, millions of square feet of office and retail space, schools and other amenities of a small town.

Developer Robert Kettler envisioned creating it from scratch -- on about 3,000 acres -- over the next 10 years. But Kettler's plans went awry this fall, when faced by enormous debt and a souring economy he was forced to give up ownership of the property to Chevy Chase Federal Savings Bank, which had provided the financing. As head of the development firm of Kettler and Scott, Kettler will still manage the project.

The troubles appear to have little effect on the residents who already live in homes in the development, between Route 7 and the Potomac River, within view of the rolling hills in Loudoun's horse country. Dust and construction noise fill the area, but residents say they're banking on the end result, which on paper will look much like Reston, the still-developing new town a few miles away to the south in Fairfax County.

On Woodthrush Court, the anchor of the completed Cascades neighborhood, neighbors said they believed that too much money had been invested in the development to let the project fail. They voiced confidence about their new homes and the planning that went into them.

"I think it's going to continue to be a wonderful development," said the Rev. Paul Opsahl, whose Community Lutheran Church is slated to open at Cascades in 1991. "Everybody watches the market with interest, concern even. ... But of all developers, Kettler and Scott must be one of the best."

With dust on her window and the sound of construction drifting into her living room, Jenkins said: "We have beautiful homes in a beautiful place. If it takes longer to finish the place, from our standpoint, that doesn't seem to be much of a problem."

The developers have geared most of the housing to an upscale market. Town houses start at about $160,000 for a basic two-bedroom unit. There will be about 300 rental units. Single-family homes with three bedrooms will start at about $220,000. Prices will escalate quickly, depending on how close a house is to the Potomac River, according to Susan Scott of the Cascades marketing department. Some houses are expected to cost more than $400,000.

Most of the development won't be complete for a decade, Scott said. Schools, office space and stores will have to wait for a better economic climate.

But much has been completed, Scott said. The pool is ready for operation, even though it won't open until next summer. There are four tennis courts, a basketball court and a small playground. Work on a library has begun and athletic fields have been graded. One of two community centers is open.

In addition, about 12 miles of roads snake through the farmland that Kettler hopes to fill with his community. Water and sewer systems are in place. Traffic lights hang across unused streets and ground has been cleared for a school, but it is uncertain when it will be built.

"They're going to count rooftops and head-tops ... before they decide," Scott said.

Geri Opsahl, the wife of Paul Opsahl, said the work that has already gone into laying out the streets and laying the foundations of the nascent town gives her a sense of the enormous potential of the place. Opsahl, who lives across from Jenkins, said she likes the feeling of being part of the town's beginning.

"This is a wonderful street," she said, referring to her neighbors. "I feel positive about it. I think it's still an up-and-coming area."

Cheryl Cox, who has a 2-year-old son and a 6-year-old daughter, said she is looking forward to having more people in the neighborhood and to a new school. While a group of boys regularly skateboard behind her house, there aren't as many children nearby as she had hoped.

"We're looking forward to more kids," said Cox, whose husband works for NVHomes, one of the builders at the site. "A lot of people work, so it's kind of quiet."

Cox, who moved to Cascades with her family from Richmond, said she also can't wait for construction behind her house to stop. The red dust from the construction site covers the inside of her house if she leaves her windows open. But, Cox said, the trials of living in a new community seem less important because of good neighbors. "Everybody is extremely friendly," she said.

Peggy Detaranto agreed. She and her husband had only lived in Cascades a couple of weeks when she had a baby -- a boy -- but a short time later another mother showed up to ask if Detaranto needed any help.

When residents had a block party last month, nearly everyone went out of their way to make her and her husband feel comfortable. Her husband, an engineer who works in Reston, was thrilled, Detaranto said.

"Everybody was trying to get to know everybody," said Detaranto, who moved to Cascades from the San Francisco area. "It's really nice here ... even though there are a lot of empty lots. ... It'll be nice to have more neighbors."