While I don't disagree we could see a demand contraction, I think your assertion is based on a tenuous premise at best: tenure == competency.
I've had the misfortune of working with many "senior" engineers who struggled with basic technical concepts and even more basic reading comprehension.
The demand for great engineers will always be there. What the market will be flooded with is mediocre ones who have improved nothing but their title in the 5-10 years of their career
What cities/type of companies to you find "senior" engineers who struggle with basic technical concepts?
IME it's much more common in 3rd-tier/mid-market tech companies, or even higher-profile companies where tech isn't the primary operating vertical, and locale != Bay Area.
Companies that can't compete on engineering culture or compensation are naturally going to attract less talented engineers, and there will be a wider variance of skill across the engineering org as a whole.