Four years ago, David Browne and his wife, Michelle, had never been to Bulgaria. But after being priced out of many booming second-home markets in the U.S., the North Carolina couple paid about $147,000 for a white-brick and stucco, three-bedroom vacation home in Sunny Beach, a popular resort area on Bulgaria’s Black Sea coast.

Like many foreign buyers, the Brownes were lured by Eastern Europe’s relatively cheap home prices—and its rising profile as a vacation spot. They also hoped their purchase would eventually pay off as an investment.

But house prices in Bulgaria have stagnated during the past year, fueled in part by a global credit crunch and a glut of new housing. In Sunny Beach, home prices fell by nearly 8 percent in 2007. “At first, we thought the place would give us a nice little nest egg when we sold,” says Browne, a 53-year-old marketing executive. “Now, we’re just hoping to get back what we paid.”

Americans have been flocking to far-off locations for years in pursuit of a better climate, a lower cost of living, tax breaks, and other advantages. The migration accelerated during the real estate boom in the U.S., as prices in traditional second-home communities soared. American house hunters like the Brownes packed their passports and sought properties in up-and-coming overseas locales from Belize to Bulgaria. While these areas lacked the cachet of an Aspen or a Malibu, they were scenic and untrammeled. Best of all, they were relative bargains.

Now, with real estate prices in some of these far-flung locales having shriveled by 10 percent or more during the past year and the pace of home sales slowing, many of these buyers are nursing substantial losses or finding it difficult to unload their properties—even at a loss.

Along the peninsula of Istria, in northern Croatia, where a third of homes are in the hands of foreign buyers, residential property sales have stagnated during the past 15 months, due mostly to rapid development, according to the Croatian Chamber of Economy. Homes in desirable parts of the Romanian capital, Bucharest, sold for an average of 1,000 euros, or $1,580, per square meter in January. That’s down almost 12 percent from the same period a year ago, according to real estate company DTZ Echinox. In Estonia, home prices have dropped by an estimated 10 percent in the past 12 months, according to government housing statistics. In the ski-resort town of Bansko, in Bulgaria, just over 30 homes were sold to foreign buyers last month, compared with more than 200 in February 2006, says Hugh Fraser, of Sofia-based LS Property. Developers in Bansko are now offering discounts of 8 to 12 percent on new homes.

The sluggishness underscores the pitfalls of seeking out deals in untested exotic areas, real estate professionals say. It also illustrates just how building booms and rock-bottom prices in once untapped markets are giving way to oversupply and a glut of properties.