Geary, I think you hit on something important here:
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Back in my hometown of 45,000 in an agricultural area of central California, I doubt there would be 10 people that would justify paying more than $1000.00 for a portrait of any size. I, personally, think there it's mostly due to a lack of art education.They would just say, "Gawwwly.....he shore is a good artist.....but, man.....he wants a lotta money for his stuff." Then drive off to the coast with friends in a 60 thousand dollar Escalade and think nothing of spending 500 bucks on a fancy dinner.
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Chris Saper and Peggy Baumgaertner have talked about the phenomenon of "induced demand" in portraiture. Having more top quality portrait artists in an area doesn't mean less work for each (due to competition) but rather, more work for each artist. Prospective clients begin to see lots of good portraiture in the homes and art shows around them (and learn what the typical prices are) and that starts the idea growing. Once a half dozen of their neighbors have paid $5,000 plus for a gorgeous portrait, they start to think it might be a good idea too. And, Geary and Lara, since you'll both have a Seattle-area waiting list of a couple of years, maybe I'll get the commission!