I don't think it's dying, but it's in a bit of a strange place. There has been some terrific foreign horror and smaller films over the past handful of years, but unless you are a horror fan who comes on boards like these or goes to festivals and finds out about movies like these, you're not going to be seeing them.
What I am noticing is that some of these directors that are making these fantastic horror films are starting to get opportunities in America. Directors like Park Chan-wook, Kim Jee-woon and Pascal Laugier are currently in the process of making American horror and/or action films. Hopefully this migration will continue.
In terms of other American horror, there really isn't a whole lot coming out. There is the yearly Final Destination entry, your typical remakes (like Straw Dogs) and only a few bright spots to be seen.
Here is what is upcoming that looks promising:
Don't Be Afraid of the Dark
The Girl With the Dragon Tattoo
The Cabin in the Woods
Abraham Lincoln: Vampire Hunter
World War Z
And half of those aren't even what I would consider full-on horror films. And with the exception of a couple of those, I don't see any of them spawning some new horror craze.
So at this point, all you can do is seek out some smaller stuff (watch out for reactions from Midnight Madness films at the Toronto Film Festival) and hope that one day a movie hits that starts a horror trend other than a slew of sequels.