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Well, online self-publishing has actually made it possible to make a living writing and selling to some of those smaller niche markets which can't get what they want from established publishers because sales numbers would be too low to be worth it for them. The upside of this new publishing world is that an author can make a living selling less copies of each book (if they still produce quality stuff, that is). (The downside is the flooding of the market you mentioned yourself)
What I'm trying to say is: if you enjoy reading that particular genre, then there's bound to be others who will too. Write the stories you enjoy and you'll find a market if you keep at it.
Look at this way: can you find books in the stores that match what you're writing? If not, then there's an untapped market, a small one yes, but one where you might become the next big thing and thereby widening the market. If you can find those books, then there's definitely a market, and you "just" need to force your way into it. Making a living as a writer will never be an easy path to walk, otherwise everybody would do it, but surprisingly many people manage to achieve it somehow. To back it up with some statistic: about 200 new authors pop into the major bestseller lists each year. And plenty of authors make a living without being a bestseller.
I hope that was optimistic enough for you.
Ah, you're too nice. There's a long way to go, yet. But, hey, I'm definitely not being pessimistic; I truly believe I can make a living writing stories one day.
By the way: I popped by your profile and saw that your favorite authors were mostly speculative authors. Do you write mostly fantasy/science fiction yourself or more "realistic" genres?