In theory, this is true. In practice, it seems people working from home want to be near stuff that can get them out of their homes, so they don’t feel so isolated being at home all the time. Work isn’t the only thing a city offers.
It used to be that most people travelled in to the CBD for work. Hence very expensive housing the closer you were to the city.
I don’t think house prices have adjusted yet, but your local shops have. Anecdotally I hear from people all over the place who say that their local shops have had a boost thanks to the increase in weekday traffic.
For instance, there are a dozen western WA towns and cities smaller & cheaper than Seattle that are full of stuff to do. Bars, restaurants, museums, parks, arcades, etc. And Seattle itself is a 30-60 min drive away from all of them depending on traffic.
Cities are nice.
Oh and there are 2 or 3 elementary schools and countless daycares within a 20min walk as well.
And while people working originally Cleveland based jobs may not get as much money as an NYC based job, there are apparently enough high paying jobs (and trust funds) to support people moving into places like NYC.