Isn't that something regulation (of mortgages) solves way better than forever banning decrease in housing costs?

how would that work?

Easy: make it illegal to require PMI in that case. Some loans will require PMI at signing (IIRC, often this will be when you put down less than 20%; you're required to carry PMI until you've paid off enough to get your principal below 80% of the purchase price), but we can certainly make clauses unenforceable that require it later under whatever conditions.

I don't think lenders have any ability to retroactively require PMI; certainly no mortgage I've ever signed permitted this.

Correct - though the dirty secret is some percentage of the economy is run on rolling loans against house equity, and prices stagnating or dropping would slow that down.