In the decade leading up the financial crisis, Spain experienced an "astonishing" real estate boom, say Suzanne Daley and Raphael Minder. Land prices rose over 500 percent and hundreds of thousands of new units were built to accommodate new immigrants and vacationers from Northern European countries. The subsequent collapse of the country's economy has spawned "ghost towns," or clusters of of unoccupied apartment buildings. There are up to 50,000 empty units near the capital city of Madrid alone, according to government estimates.
Though the Spanish government says the 12.8 percent drop in housing prices from the peak constitutes the market bottom, some speculate that prices may fall another 30 to 40 percent. Additionally, the true implications for the nation's banks are not yet clear, the authors say:
"The Bank of Spain says the banks have about $240 billion in 'problematic exposure' out of $580 billion invested in real estate and construction, a situation, they say, the banks are capable of handling. But not everyone believes that. Unlike American banks, Spanish banks have done little to open their books."