Ahaha I love this topic. Classic example of the Activision Effect.
Basically Activision did to Tony Hawk Pro Skater exactly what it did to Guitar Hero and is now doing to Call of Duty. So yea, yearly releases, not enough time to polish the games, games getting stale, etc. Then a worthy competitor belonging to EA (Skate) comes around and sucker punches it out of existence.
Hmm, now lets see, what happened to Guitar Hero? Oh yea, yearly releases, not enough time to polish the games, games getting stale, etc. Then a worthy competitor belonging to EA (Rockband) comes around and sucker punches it out of existence.
With Call of Duty, we already have the yearly releases, not enough time to polish the games, games getting stale, etc. All we're missing is the worthy competitor belonging to EA (which is currently being developed by West & Zampella).
Come to think about it, it's no wonder Activision is trying to sue EA over the West and Zampella thing..
But to answer the OP...I'd say it was after THPS4 that the series really started tanking. Underground was ok-ish and I played a little bit of American Wasteland but they were pretty meh...Which truly was a bummer because THPS4 was amazing (Along with 2 and 3, never got around to playing 1).