Desert Housing Boom Cools: Pandemic Frenzy Subsides in Joshua Tree

Twenty years ago, Bryan Wynwood began his career as a real estate agent in Joshua Tree, a quaint, dusty town near the newly established Joshua Tree National Park. At that time, many from the entertainment industry in Los Angeles largely overlooked the town, but its beauty and affordability compared to Palm Springs soon drew their attention.

Pandemic Fuels Real Estate Boom

Over the past decade, interest in Joshua Tree steadily grew, but the COVID-19 pandemic ignited an unprecedented real estate boom. City-dwellers, seeking refuge from urban areas, flocked to the desert, driving home prices sky-high. Homes sold within days, often receiving multiple offers. The allure of converting properties into Airbnbs further fueled the frenzy. "The pandemic created a stampede from the city, bidding homes up to unsustainable highs," Wynwood recalled. "Frenzied buyers rushed in, and that itself pushed the prices up."

However, many of these new owners were inexperienced in managing vacation rentals, merely "buying the dream of Airbnb."

Surge in Short-Term Rentals

Data from AirDNA, a short-term rental analytics firm, indicates a significant increase in short-term rentals. From March 2020 to March 2024, Joshua Tree saw a 50% rise in such properties, while Yucca Valley experienced a staggering 141% increase. Nearby Landers, known for having the world's largest freestanding boulder, saw its short-term rentals more than double, from 84 to 185.

Market Correction and Challenges

Despite the initial boom, occupancy rates for short-term rentals began to decline in late 2022 and 2023. Madalaine LaVoie, a seasoned real estate agent in the area, noted that most tourists visit only on weekends, leaving rentals vacant during the week and reducing profitability. "Those who purchased in 2021 or early 2022 experienced significant losses," she stated.

While Wynwood hasn't seen a significant rise in foreclosures yet, he anticipates more to come. This year, he's sold five foreclosed properties, an unusual uptick. Some owners are selling their properties despite profitability, citing the unexpected workload of managing rentals. Jonathan Ader, a Redfin agent, mentioned that many of his clients who bought vacation rentals during the pandemic have since sold them, overwhelmed by the effort required.

Regulatory Considerations and Market Adjustments

Joshua Tree remains attractive for short-term rental investments due to its unique homes and a steady stream of visitors. However, the region's lax regulations may not last. San Bernardino County is examining the impact of the short-term rental market amid a broader housing affordability crisis, potentially leading to stricter laws.

Neighbouring Coachella Valley has already implemented tighter regulations, prompting many potential buyers to turn to Joshua Tree for its more flexible rental policies. However, LaVoie notes that while the market resembles 2019 in terms ofsales volume, prices remain much higher. In April 2024, the median sale price in Joshua Tree was $326,000, over 50% higher than in April 2019.

Current Market Dynamics

Although prices have dipped from pandemic peaks, bidding wars are less frequent, and properties often linger on the market longer. "Now we have limited buyer demand because that rush to flee the city has subsided, work from home has subsided. Demand for rural real estate has subsided," Wynwood explained. He added that it's currently a buyer's market, with ample inventory and attractive deals available.

As the market adjusts, Joshua Tree's real estate scene is stabilising after the tumultuous pandemic period, offering opportunities for savvy buyers in a landscape that's still evolving.