2025 Hi-Desert Real Estate Market Forecast

As we review the 2024 market data, we can see one of the worst markets our communities have seen in many years. Times are changing and so is our local real estate market. Much like 2021, there are several things on the horizon that can greatly improve our market and return us to a more stable environment.

2024 saw us close escrow on just 917 homes.  This is 200 less than 2023 and over 700 less than 2022. In addition, we saw 74% of sales were below $400,000. Average prices declined in all three major markets. Average price per square foot declined in Yucca Valley and Joshua Tree. Twentynine Palms saw an $11 increase in price per square foot but is still well below replacement cost.

While I am writing this, CNN and the National Association of Realtors (NAR) have announce that, nationwide, sales of existing homes were the lowest in 2024 since 1995!

So what is going to happen in 2025 in our local market?

To be honest, forecasting our market can be difficult. We really don’t sell a lot of homes to make the math work well. In order to be even close, I believe you have to have local experience and participate in our local leadership. I am a 45-year resident of the Hi Desert. I have served on both the Hi Desert Water District board and the Morongo Basin Healthcare District board. On top of that, I love, love, love where I have been blessed to live and work. I am a big cheerleader for our communities.

With that said, here is how I see 2025-

Several outside factors are going to dominate our local market. I have narrowed it down to five major influences and how they can impact our communities. In no particular order-

• Interest rates- Since 74% of sales were under $400,000 it is clear that our local buyers can only afford homes in this price range. This makes interest rates even more important to these buyers. $100 a month can make a big difference in a family’s lives. Every penny saved is used somewhere else in the budget. I don’t see a major change in interest rates this year. I could see rates getting into the low 6% range by the end of summer. Maybe they will get into the high 5% range by mid-2026. But for the first three quarters of 2024, I expect interest rates will stay within one point of today’s rate which is around 7.25%.
• Los Angeles fires- At this writing, over 16,000 structures have been destroyed or damaged in the recent LA fires, many are single family homes. As I write this, new fires have flared up in San Diego County, Riverside County, and another in LA County. It is easy to forecast the damage could grow to over 18,000 lost structures. We are already in a house shortage in these urban areas. Losing this many homes will force people to relocate. Our local communities have done a better job of providing internet access, which helps people that work from home have access to work. I would expect many of those who lost homes will relocate to places like Las Vegas or Phoenix, but many should migrate to the desert. I would expect this will have a positive impact on our local inventory. Look for inventory to drop below 600 by summer. I would expect inventory to drop more by 2026 and remain in the 400 to 500 range from there.
• Insurance- Several major companies have left the California market. Many more are putting additional disclaimers on their policies. I have read that several companies have used drones to fly over neighborhoods to see the condition of roofs. A homeowner gets notice that their roof will need to be replaced, or their policy will be cancelled. Imagine your insurance company deciding you need a roof and threatening to cancel policies. Imagine needing to come up with $20,000 to replace your roof in a short time. In addition to this, most of us have seen insurance rates go up over 150% in the last four years. Many of our homes are located in High Fire Zones. These are the people at most risk of losing insurance. Places like the Mesa area, Landers, Rimrock, Pioneertown, Pipes Canyon, and Morongo Valley could see the availability of insurance disappear. How can you sell (or buy for that matter) if insurance is not available, or is only available at an outrageous premium cost? If our community is already struggling over the cost of housing, this will just exasperate the situation. I cannot see any positive resolution to this in the foreseeable future. It will plague our market for several years to come.

The issue is so important to a sale/purchase that the California Association of Realtors (CAR) has added a requirement to the Purchase Agreement that a potential buyer has 17 days from acceptance to show proof of insurance. This was new in December.

• Joshua Tree Re-classification-Our State has been playing around with the Joshua Tree for about five years now. The Tree has been “protected” for as long as I can remember. Now the State wants it to be “pre-endangered”. This is precursor to full endangered status. In 2023, after a lot of push-back on the reclassification, the State made this change. Now in 2025, the State wants to go further. I would expect the full change will be voted on in June. With this change, the State will require you to apply for a permit with the State Fish and Wildlife to remove any trees AND to disrupt the ground around the trees. At this point, it looks like the State will classify no disruptions within 25’ of a tree, classified as the Root Zone. There will also be a classification for the Seed Bank of 50’ around a tree with no disruptions. The State will charge a fee if you need to disturb these areas. To give you an example- if your leach field fails and you need to replace it and there are trees within the above two areas you will have to apply for a permit from the State. You and I know the State moves at its own pace. You could be waiting for approval for months. Then you will have to pay a fee to the State to fix your existing leach field. It is estimated that the Hi Desert Water District will have permit fees in excess of $15,000,000 to continue the sewer project. That’s $15 million! It is foreseeable that a homeowner replacing a leach field could wait months for the permit while their septic leach percolates to the top of the soil. In addition, it is estimated that the homeowner will have thousands of dollars just in the fee permits BEFORE they even begin to replace the field.

Along with this, vacant land with Joshua Trees will become worth much less than those without. Some might even become “unbuildable” because of the “take permit cost”. So, imagine, you have a beautiful view lot with a dozen Joshua Trees that is now financially unbuildable. This issue will be ongoing and be detrimental to the western parts of our community (because more lots have trees on the west end than the east end).

• Desert Hot Springs Development- This is the best news for our community for the next several years. An Amazon warehouse in Desert Hot Springs (DHS) is near completion. This is an approximately 960,000 square foot distribution facility located off Indian and I-10. Next door, the developer is also building a 1,100,000 square foot building on spec. He does not have a tenant yet but believes one will sign up quickly. I am told there are another 6 mil+ square feet of warehouse in planning in both DHS and North Palm Springs. In total over 8 mil+ square feet of warehouse is in planning for the area. I am also told that each million square feet will equate to one thousand jobs. It is anticipated that these will be living wage jobs. In total, 8,000 thousand jobs are to be created in the next five years. What a boom for our communities! If just 10% of those workers lived in our communities, it would equate to 800 homes! Living wage jobs just 30 minutes away. Our communities have never seen this kind of opportunity. I strongly believe our community will benefit from this development. You might like to watch the news on these developments. There are a few activists that are fighting against this. We should be supporting this. WE NEED JOBS!

With all that, this is how I see our local market developing over this year-

• I believe we will see more buyers this year. Either because of the fires or development in DHS, I believe we will see somewhere between 1,200 and 1,300 closed escrows this year.
• I think prices will remain near today’s numbers. I don’t see an improvement, but I also don’t see a decline. We have plenty of inventory which will help stabilize prices for the year.
• I think both Joshua Tree and Twentynine Palms will see a small decline in sales. Yucca Valley, Landers, and Morongo Valley will see a slight uptick in sales. Growth in Twentynine Palms has been led by short-term vacation rentals (STR). I see this as a maxed-out concept in the area. Since there are little jobs near or in Twentynine, I expect sales will slow down at the east end of the valley.
• I would also expect many STR owners to rent to fire victims on a monthly rate instead of a nightly rate. If you need a house and are from LA, the ability to rent a furnished home for a period of time may just be the answer.

It will be interesting to see how it all unfolds.

Thank you for your time to read this. I look forward to comments and discussion.

Sincerely,

Bob Armstrong
(760) 221-2999
DRE #01275801
♻️GREEN Real Estate Group