Number one is probably best. Act fast as the construction field is starting to move a little and prices could go up, especially as summer is coming. Right now prices on labor and material should be down if you look around. From my builder, window prices are way down right now.
I
f you are planning to move in the near future, then my advice changes, but only if you have equity. While it may seem bad to sell when prices are down, remember, everything is relative. Since the higher end houses are having a harder time selling, you should see a higher drop percentage wise on them then on your lower priced homes. In addition, you will pay less on any loan fees, excise taxes, any real estate fees, etc. since they generally are a percentage of the sales price.

Another great option is looking at a builder repoed lot and making a low offer to the bank. Since elma is a small town, a lot of the options available other places might not be available there. In my market area we are seeing lots coming from the bank at 30% of the price 2 years ago, cheaper than what the development costs would be. Add in lower construction costs and you can build fairly cheap.