What are your short and long term goals with home ownership? Many times people just haven't thought of the long term. Home ownership is a great achievement, however if you do not plan on staying in a home for too long, you should defintely consider renting. If you plan on outlasting the market downturn, then go ahead and buy.
Or, even if you feel prices will stabilize, you have to look at your monthly cost for renting versus buying. In some areas, such as Northern Virginia, a house that costs $600,000 will rent for $1,900. Even with the tax deductions that homeowners receive, it may make sense for many people to rent rather than buy.
Or, you may be able to afford to buy, but you'd be trading off a desired lifestyle (vacations, nice cars, etc.) that you can afford by renting, for a perhaps less desirable lifestyle (homeowner, but no vacations, older cars, etc.)
Those are just a few of the many instances in whcih it might make more sense to rent than to buy.
Hope that helps.