Add some plants?

A sunken patio will effectively make the fence taller and block some of the view of their house. To block the view of your neighbor's house, you need trees or tall plants. Big Bluestem grass gets quite tall.

For more privacy, have you considered a trellis with a vine on top of the existing stockade fence?

A few large pots and a few lengths of pipe mounted to the fence with string lines for the vine to cling to. Lots of perennial vines, look for your zone.

I'd build a privacy screen around the pump, it could act as a barrier for your lounging area.

I am not a fan of a tiki bar or fixed bar area,

You, Mom, will be the only one that maintains it.

a rolling cart could be stored in the shed for days when snacks are needed.

Get as much seating as budget allows, so their friends can hang out.

Thank you! These are great ideas that are cost effective for me! And you are right about maintenance so sitting area for them will be the way to go with some nice lights 🤣

Big Bluestem grass I will look into to see if its container friendly for the are

These pictures seem familiar, did you post your backyard in a previous post?

Andropogons (Big Bluestem) tall, also Panicums.

@lizedv I posted last year, because i fixed the rest of the yard! now getting to this side.

@Katie Campbell

Do you still have the link to your previous post? I quite sure I had submitted something but without an idea of when or the link I cannot find it.