This is the same thing I experienced here in my home town in a personal way over the past twenty years. My parents purchased the 80-acre Marohn homestead back when I was a little boy for something like $500 per acre. In the mid-1990's, development was taking off in the Brainerd area and raw land started to skyrocket. The narrative was that all those rich people from the Minneapolis/St. Paul area were moving up and they could afford to pay outrageous prices. Heck, they thought land was so cheap they just threw money at it.

We heard reports of land selling for $20,000 per acre. Then I, in my capacity as an engineer, worked with someone who paid the insane price of $30,000 per acre for land about a mile away from our farm. A little later, one of the old farms just up the road sold for $35,000 per acre. My parents were convinced that their much nicer property was certainly worth $40,000 per acre, at least. They still own it with the assessor having it worth six figures but with their own balance sheet valuing it in the millions.

Here's the absurd thing: there is so much land here that the price should be zero. Or, at most, the price of the land should be as if it were used for forestry, agriculture or hunting. Years ago, I did some simple math and showed some bankers that there is over 100 year's worth of supply of developed lots in the area. That excluded the raw land, land that the owners still expect to be worth millions.

John Maynard Keynes observed that wages are sticky. That is, when market conditions falter and businesses start to see profits drop, they are more apt to lay people off than they are to cut wages. People are very resistant to wage decreases because humans are wired to to be very sensitive to loss, far more than we are to gain. Freeze wages for three years and people will gripe. Cut wages for three years and they will revolt.

Land prices are subject to this same human condition. Unless forced to sell -- such as in an estate sale -- many people mentally book gains and will not sell until those gains -- or something near them -- can be realized. This is why rumors of free-spending Chinese, wealthy San Franciscans and tech workers dripping with dollars are so widespread. They are part of a cultural belief system that explain -- in an affirming way -- what we see happening.

Portland grew by 1.5% last year. These are growth rates not seen since before 2008. Just ponder that number -- 1.5% growth -- and contrast that with housing prices and rents that are growing by double digits. Portland has spent billions -- BILLIONS -- preparing for growth. They have built rail lines all over the place, built highways throughout and run thousands of miles of pipe in anticipation of growth. Yet, they can't handle 1.5% growth without blowing up housing prices? Think of any other entity in any other realm that grows by 1.5% per year and contrast the reaction of that system with the hysteria of Portland. If this is only a 1.5% wave, it doesn't make sense. That kind of wave should roll across the sand and dissipate. Something is magnifying it.

In Portland today, there are three types places where this wave is being accommodated. The first is the core downtown, what I've called an urban planning Disneyland, where truly high demand for a unique place combine with high building costs and relative scarcity to price this area out of reach for most. The second place is in the remaining greenfield areas, where single family homes are being built in the insolvent suburban style we see all over North America. Neighborhoods are built all at one to a finished state; there is no next increment of intensity anticipated.