I dont know what the building materials cost in your area, (concrete, lumber) but the actual cost to build a 2 x 6 home in Az. with decent upgrades, tile roof, midrange flooring should be in the 75/85 dollar a square foot range, thats assuming you have a standard size garage and porch included. No septic tank etc. A contractor is normally going to charge around 30/40 for his fee. That doesn't include extras like marble or granite counter tops, hard wood (or any premium flooring), built in wall units etc.
My business partner and I built a custom 3500 sq ft home (almost 5000 under roof) to sell 3 years ago for 220,000 turnkey(not including the lot). that was about 63.00 a square foot. 2 fire places, corian counter tops, full lengh porch, septic tank,wet bar, 3 car oversized garage, tile roof, 18" tile through-out. Since that time concrete has almost doubled, lumber has almost doubled, labor and other materials haven't changed much, permits are the same.
We did another one last year, same floor plan, and it was almost 78.00 a square foot.
We originally purchased 5 lots so we have three to go, its a good thing we did because the lots have almost doubled!!!!
To make my point, 120/130 a square foot is not too much, make sure you get a good flooring allowance and everything else you want in a contract, make sure the builder has a contractors license, check him for complaints, and go look at some of his work.