“You had a property boom. The market was driven by foreign investors, and now that is beginning to turn,” says Michael Ball, a professor of real estate at Reading University in England. He says second-home markets in many parts of Europe were exposed to a correction but that Eastern Europe and the Baltic states are getting hit worse. The Mediterranean and Central and Eastern Europe are particularly vulnerable to falling prices because “prices rose fast amid speculative interest and the easy availability of credit, but the supply of new homes is increasing at a prolific rate,” Ball says.

Economists warn of another potential crisis for some of these buyers. Many have taken equity out of their primary residences to invest in second or third homes abroad. As a result, they are even more exposed if prices stop rising and central banks tighten interest rates further. “It could get uglier for some of them,” says Jonathan Lohr, head of international sales at Ceiba Realty, a U.S.-based property firm that specializes in overseas real estate.

Eastern Europe and the Baltic countries emerged as hotspots for foreign investors after the European Union expanded to 27 countries, in 2003, considerably relaxing foreign-ownership laws in many of its states. Low prices and tropical allure drew buyers to Central American countries such as Panama, Belize, and even Nicaragua. Middle East locations like Dubai and Qatar saw increased traffic from American and European buyers on the hunt for real estate bargains.

The internet helped quicken the trend, experts say. “All of a sudden, you had people surfing the internet for real estate deals and buying houses in remote locations sight unseen,” says Manfred Chemek, chief executive of Manhelm International, a Houston-based property firm that specializes in international real estate for Americans.

Now, a global credit crisis that began in the U.S. subprime-mortgage market last summer, gyrating world financial markets, and a plummeting U.S. dollar are all helping to slow overseas property sales.

To be sure, the bottom has yet to fall out of many foreign real estate markets. Global real estate professionals say many areas are simply adjusting after years of record growth and development. Some predict that the same factors that led foreign buyers to invest in off-the-beaten path areas will continue to draw investors.

“As the dollar gains better parity with the euro and other currencies and the financial markets steady, you’re likely to see stronger U.S. and European investment again,” says Orlin Vladikov, chairman of the Central European Real Estate Associations Network.

A glance at international property websites still shows bargains compared with home prices in the U.S. A two-bedroom cottage can be had in Croatia for $65,000 to $90,000. In Belize, a new beachfront house costs as little as $140,000. And in downtown Warsaw, $165,000 buys a one-bedroom duplex in Mokotow, one of the city’s hipper neighborhoods. Finding anything like that in the Hamptons or Miami Beach is nearly impossible. Yet at the moment, so is turning a major profit on a recent purchase.

“If you bought a bargain home in a remote location, don’t look to make a profit anytime soon,” adds Lohr. “But even if you own a home in a traditional location, you may have to wait out this downturn before you can see a substantial return on your money.”