i dont know whats wrong, but i would try and remove some of the grass around it and put a little bit of mulch around the base.

Hi Melody. Beautiful trees huh, we have two of them. If you're getting sparse and yellow leaves, my first inclination is to ask how much water it is getting. Your grass looks well hydrated so the DW could be getting too much water. They are sensitive to over watering. I'd clear out the grass from around the base by a foot or so and use something to plunge some deep holes into the rootzone so it can get breathe better. Nothing fancy, bamboo sticks, rebar, whatever you have handy. Let it dry out really well and it should rebound...assuming it is getting too much water.

Also check to see if there has been any damage to the bark from being bumped by a lawn mower or string trimmer.

I removed the grass and there is a TON of those little tiny ants.... Could that be some of the problem???

Your grass is really thriving. I thought Desert willow is a desert plant type. Maybe too much water?

I also think too much water...guessing with the grass as a clue.

There could be too much clay in the soil and/or not good enough drainage. I don't know about you but we have had a very wet summer here, some of my plants have chlorosis and some xeric plants looks a bit sickly even with good drainage although my Desert Willow looks fine. I can't complain (well maybe I can a little & I usually do) since we've been desperate for rain to relieve the drought. This kind of summer rain is unheard of and the humidity is off the charts. Anyway, one way or another we all seem to be diagnosing its too much water.

I just saw a show on TV where they were saying we absolutely depend on ants because they aerate the earth's soil and help keep it from being compacted. I'd never heard that before so maybe the ants are a good thing?

Ants can mean aphids, they love their honey dew. I have a young two foot Chilopsis tree just about 3 weeks in the ground and it is yellowing, I hope it was over-watered, because I did water it a lot and that would be easy to fix. The green stems are blackish brown and spotted. It was that way when I bought it and I worried that it didn't look right, but I got it from a reputable nursery. It is blooming like crazy but I'm thinking maybe I should cut off the numerous flower buds, I don't know.