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Too much of anything spoils it. But makers will churn out anything which is accepted by the masses. Gone are the days when a Fulci or a Romero made films on zombies which looked classy despite their cheap budgets, and subsequently became milestones in the genre.
Now, The Walking Dead is a runaway hit, Warm Bodies garnered enough interest, World War Z is on the way...the interest around zombie productions never ceases down. Add to all the mainstream stuff, the number of mini budget indies which are made every year as well.
As long as it's interesting enough to make some money and people are willing to spend some $$s on it, even if it is direct to video/DVD, they will continue to be made. It isn't on the decline for sure.
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