Will California See Ghost Towns?

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This Bloomberg article highlights the rise of ghost towns in Spain as a result of overbuilding, low interest rates, and a ton of over-supply.

The abandoned developments are evidence of a housing glut
that will lead to Spain’s first decline in home prices since at
least 1992, when the Housing Ministry started keeping records.
Spanish builders constructed 750,000 houses and apartments last
year, more than France and Germany combined, while annual demand
runs about 60 percent of that, according to the Finance Ministry.

“The real killer of the housing market is the immense
oversupply,” said Gonzalo Bernardos, a professor of economics at
the University of Barcelona. “Prices are already unofficially
falling.”

New and existing house prices will drop by 20 percent from
now through 2009, Bernardos estimates. The country built an
average of 432,411 houses per year from 1996 to 2005, more than
France and the U.K. combined.

Spanish home prices have more than doubled since 1998,
exceeding growth rates in the U.K. and Ireland, two of Europe’s
fastest-growing markets. The increase has been driven by a drop
in interest rates to less than 3 percent from about 15 percent as
Spain adopted the euro, household incomes that swelled as women
joined the workforce, and a surge in vacation home purchases by
Northern Europeans, mainly Germans and Britons.

Will the interior portions of California turn in to ghost towns? In areas like the central valley where foreclosures are overtaking the communities:

For the second month in a row, six out of the 10 cities with the nation’s highest metro foreclosure rates were located in California. Stockton, Calif., again registered the nation’s highest metro foreclosure rate, one foreclosure filing for every 131 households â?? nearly six times the national average. Other California cities with foreclosure rates in the top 10 included Vallejo-Fairfield at No. 2, Riverside-San Bernardino at No. 4, Modesto at No. 6, Sacramento at No. 7, and Merced at No. 8.

The numbers keep getting worse for the inland areas. Just doing a search on RealtyTrac for Lancaster, CA results in 2,919 foreclosure properties. And if the big cities are taking a beating just imagine what’s going on behind the woodshed out in the newly developed areas. Will whole communities just walk away?

Personally, I think that the reduced prices will lure people in to buy these homes. I don’t think we’ll see ghost towns but it doesn’t take much to get there in your mind…