Doesn't that mean that developers will be forced out of living in desirable areas with higher costs of living?
Companies were definitely overestimating the need/benefit for this locality but that doesn't mean it is now zero.
Places where current wages are low are going to see wage increases (because of higher demand / lower supply), which in turn will lead to an increase in costs of living.
Places where current wages are very high are going to see downward pressure on wages (because of lower demand / higher supply), which in turn will eventually lead to a lowering of costs of living.
Obviously that's valid in the "fullness of time". How long it can actually take for this new equilibrium to be fully realized is anyone's guess.
I'm not sure that there's so many SW people outside of the big tech hub areas so as to make such a difference. If they are more uniformly distributed across the country, their impact on each community will likely be negligible.