Thanks all for the responses. Here's a few more pictures with some info in order to provide a clearer picture of the current layout/future layout. The first image is a design my friend came up with. Area 1 is the grassy area and sunken area that I originally posted. As you might be able to see, what would have been the bocce ball court is the long yellow rectangle, with the two green circles trees. The tree in the middle is existing, and we were originally going to put in another ficus at the corner, but decided against it so it doesn't one day inhibit our view from the balcony. Area 2 is pictured in the 2nd image in this post. It's the same elevation as that sunken area from the original pics, but opens up. There's an RV gate at the end. Currently, I'm thinking about laying concrete in that area and then building a shed/detached garage for me to work on cars and use as a woodshop. It's not set in stone yet as far as that being the route I will definitely take. Finally, area 3 is the final picture in this post. It's also the area that's going to have the most work done. It will become an entertainment area, with a firepit and built in seating, as well as some additional small trees and plants to get some greenery. The red area will be pavers. In the corner are four boxes, which will be planters for a small vegetable garden.

"The large deck ... is structurally sound, the boards are not in good shape." What exactly does "not in good shape" mean? ... that the surface is not good but otherwise they are OK ...? That sounds like a couple of decks that came with a house I once owned. They were functional but ugly from years of weathering and no attention whatsoever. They were transformed into completely acceptable, nice actually, merely with pressure washing, a quick, coarse sanding, and two or three coats of deck paint (not stain) applied with a paint roller. It was not a huge, horrible job and they looked almost as good as new. They were much easier to keep clean with a hard paint surface. The cost to fix it this way, if DIY, would be a couple hundred bucks. If not DIY, a few hundred ... vs. $17K. If you could get another dozen years our of your deck and have it look nice, too, would that be acceptable? Landscaping is a discipline where one must not ignore site conditions or impose unrealistic solutions if they expect to produce a result that is pleasant, lasting and maintainable. I question the overall direction of making a small porch with steps down to where all the landscape features would be. This seems intrinsically less useful than would be having a decent sized deck immediately off of the main living space. I see a grill but not a dining table. Where does the outdoor dining happen? If the kitchen is separated from outdoor dining by a full flight of steps, it will surely be made much more inconvenient. But the real deal-breaker for me is the imposition of "no groundcover," which is driven by unrealistic beliefs based on emotion, when the site itself is demanding groundcover for practical reasons: there is slope and there is shade. Are we really going to spend $50K in order to change this into flat, sunny ground? It's going to require significant retaining walls & grading in addition to all the other new hardscape and planting. On the subject of husband's allergies to pine, I presume you're talking about allergies to pine pollen (since contact with the plant itself can be easily avoided)? Getting rid of the pines is going to make virtually no difference if there are other pines in the neighborhood or region. During the pollen season, which lasts for a couple of weeks, it can blow statewide and there's no escaping it. One's best hope of avoiding it is to stay indoors as much as possible during that time. I think you should begin with the budget because it will determine what is possible vs. what is fantasy. Re-contemplate the goals ... not how to achieve them, but simply the objectives themselves ... what activities do we want to do outside? How convenient do we want them to be? How private should it be? ... etc.

Raymond, a regular Houzz contributor, Benjamin Vogt is a landscape designer in Nebraska. He specializes in native gardens and is incredibly talented and knowledgeable. If you border a pretty natural area, he would be invaluable in helping maximize the lots potential. Seek out some of his articles if you have a chance. Good luck!

IMO, the deck and built-in seating outside of the patio doors is all wrong and should be removed. If there is any built-in seating, it should be incorporated into the top of the retaining wall (which needs reconfiguring) and should be facing outward ... though built-in seating is not the only option. It would be easier to have free-standing seating. The course of the retaining wall should not end in a "sawtooth," step-down fashion. Instead, each couple of courses (or how many are determined) should turn 90* and run toward the soil they are enclosing. They should run long enough to finish enclosing it. This way, soil is not "leaking" around their ends. Let's pretend that a huge amount of water -- a full bathtub of it -- was suddenly on the patio and looking for the easiest escape route. Which way is it going to go? ... Toward the back lot line or toward the side lot line? If it goes to the side will it continue to the front or then go toward the back? Once the ultimate path of the water is known, it's up to the designer to specify grading that makes the water escape easier. Undoubtedly, this means lower grade at the edge of the patio and pitching it slightly downward (in the direction of the escape path) such that water has no obstructions or obstacles to climb over, since it will refuse to do that. Hopefully, the drainage path is toward the back lot line as that would make more sense and make everything easier insofar as getting the flow going properly. The patio could be expanded in order to serve whatever uses the homeowner seeks to satisfy.