I would not build a house in Santaluz. The supply of high end homes there greatly exceeds the available buyers right now.

My suggestion – do not pay too close attention to the asking prices of existing homes. Find a house in Santaluz that you really like and make a lowball offer such as $1.5 mil, your estimate to build. Then, wait out the seller. Like you said, it is expensive owning in Santaluz ($1700/month in MR and HOA alone). Count in a mortgage and I don’t think that some existing sellers can hold out for that long. Prices will continue to decline.

Alternatively, if you really want to build your own house, you can make a lowball offer on a lot. Those prices are also going to continue to decline.