You are spot on and I am surprised that this is often overlooked. The industry is either on the the track to the massive shift how it operates, or, after COVID it comes back to the traditional in office MO.
Businesses found it necessary to exist in Silicon Valley because it provided certain benefits, and businesses found it necessary to have on-premises employees because it provided certain benefits. Since California won't allow any on-premises anything, the cost-benefit of being in the Valley and having people in the office is being reset. But if your skills and aptitude are scarce, there's no reason to believe wages won't continue to reflect that. And if your skills and aptitude aren't scarce, you were overpaid in the first place.
I just know that the improved state of affairs has my wife and I dreaming of remote work in a rural area one day soon. Come on Starlink!