I just got back from a vacation to Spain. It was great! Just wanted to give you some experiences with the hostels that I stayed in.
Madrid: Hostel Lisboa - It was a spacious room. There was a bedroom plus a small living area. The hostel is located in a quiet neighborhood within walking distance of the Prado. Also it was very economical compared to the other hostels that we stayed at during our trip. Definitely recommend it.
Seville: Hotel Maestranza - A little bit on the expensive side. It is very expensive during the month of May, then gets cheaper in June. Room was not very spacious. But the hotel was in a good location, close to the cathedral. Would also recommend, but a little bit expensive.
Barcelona: Hostel Levante - The worst hostel out of the three that we stayed at. Room was small. No air conditioning. It was very noisy. Located about 5 minutes walk from the Ramblas. No tv. This is the only hostel that we could find, we booked our hostels more than a month in advance. Based on this experience, I would suggest booking hostels at least 2 months in advance of your trip, especially if you are planning on going to Barcelona.