"New Text File ..." default location is the user root directory

[Greg Raven]

For years, when working with files in a project, I could left-click (Control-click) on an existing file or folder, select "New Text File ...", and create a file in that location within the project. For the last few weeks, BBEdit has been defaulting to the user root folder, which is a pain in the neck.

What did I do wrong to change BBEdit's behavior from logical to mystical?