Oh it is not that bad Jacko.
Buying a house or not is a very personal decision IMHO. It is very involved and definitely involves a certain financial risk. Many times it is equally an emotional one, since it is your place of living, and a part of your daily life, unlike a stock or bond. It is also illiquid as you pointed out and the transaction costs are relatively high.
With these points in mind, I think the next 1-2 yrs certainly represent a buying opportunity for those who have been waiting for the last few years.
Closing costs are high, but if you are buying in the 300K range, I doubt they come up to much more than 1.5% or so.
The mortgage interest as well as property taxes are tax deductible and therefore gives you a little break with uncle Sam' bill. All of the money you are paying in is lost unless you get some appreciation in your house price and for the next few years and that is not a given, in fact, in my view it is likely we will be at the same prices we are at now in 3 yrs from now.
However the pleasure of you and your family living in a home you own are many.
Additionally, none of us can exactly time the market, if you are in a place for the long term and have a steady income and take a position in the housing market while it is down, you will be in a good position to ride the pick up when it inevitably happens, a couple of years from now.
With all the risks now however, job risks, economic risks, house prices risk and for many on this forum the immigration issues risk, renting for a while, atleast a year or so and seeing which way the winds blows can be considered a balanced approach.. I doubt that by this time next year you would have missed the boat!