Should I buy a foreclosure?

My husband and I are looking to buy our first home. We currently live in Orange County, California which is very expensive. Houses in our city start at around 500K. There are a few cities about 20 to 30 miles away that have nice houses starting at 150K, but most of them are short sales or bank owned. My question is, is it safe to buy a foreclosed or short sale house, if any house, in an area like this? We went to see a few open houses this weekend, and some streets had every other house with a for sale sign on it. These houses were built around 2005 and most previously sold for several hundred thousand dollars more (ie. current short sale at 175K last sold for 400K). Could these brand new neighborhoods never recover from the housing market crash? I want to make sure that our investment is good. Thanks in advance :)