I would have expected Martin prices to go up much sooner than this. Keep in mind that the low to mid priced Chinese acoustics that Martin has been competing with in the last few years (Blueridge, Eastman...etc) have also had pretty serious price hikes. I purchased my Blueridge BR180 just 8 or so years ago for about $700. The price today, $1100+ (but closer to $1200+ at most places). The price of some Eastman acoustics is higher than an all solid wood Martin. Compare these two:
In this case, the Martin is actually cheaper!
However, if you were to purchase that same Martin acoustic (spruce top with hog b&s) with an Adirondack top, and ebony fittings (like the Eastman above), the price would skyrocket past the price of the Eastman. But the point is made. Martin should not have to compete with inexpensive Chinese acoustics on their own turf. Even Eastman acoustics (known for their high quality build) is still no real match for Martin's quality build level. So Martin is just catching up with the rest of the world and raising their prices to stay where they should be, somewhere between the boutique hand made instruments and the decently made Pac-Rim instruments.
We may live in a time where purchasing a very nice acoustic is more affordable than ever, but only a Martin is a Martin.