In the kitchen, downstairs I get sever knocking when I turn the faucette to hot and almost no water comes out. The same is occurring with the dishwasher which sits right next to the sink; the dishes are not getting cleaned, and at times (I'm assuming when it's trying to use hot water) the knocking appears.

Other places in the house all supply hot water just fine with no knocking. The kitchen faucette does supply medium hot water; definitely hotter than regular tap water, but not full hot.

The house is less than two years old, in California. Any ideas?

Sounds like you have some crud in the hot water line. If you can figure out how, shut the hot water off, take the insides of the hot water faucet out, and briefly turn the water on to flush out the crud. If you can't get it apart, post back with the brand and model, and our real expert will tell you how. The dishwasher will be more of a pain. Remove the bottom panel and see if you can find the incoming water line. Remove it, and again run a little water to flush out the crud. Check the solenoid valve to make sure it is clear before putting the line back on.

My wife tracked down a representative from the developer, and apparently he fixed it by simply tightening the tap (not the faucette, the tap under the sink). Not sure what that was about exactly, but apparently simple to fix.