As someone who usually writes fantasy that takes place on other worlds, I like being able to make my own cities and towns and do with them what needs to be done.  When I write in the real world I like to do the same.

For Dark Angel I knew I wanted to set it in my home state for a few reasons.  1) I've never read any fantasy set in my part of the country 2) I'm familiar with the environment and culture :) and 3) it works just as well as any other place would, so why not.  I needed a town that had certain amenities, which meant a minimum size, but not too big.  I needed a certain sized town but not a real one I'd have to have some familiarity with, so I made one up (I'm too afraid of getting some detail wrong) .  There are a few scenes that take place in the capitol city in one of the actual hospitals, but I didn't want the majority of the story to take place in a real town.  I wanted to make up a high school and the town, so I could put things where I wanted them.  I had that laid-back, everyone-knows-everyone-and-their-kids feel that makes a young person nuts to get out of a small town but still had some places for my characters to go.

For one of my current WIPs, I've named a couple of real places and some fictional.  I find that with a fictional place in the real world, it helps to have some real places mentioned to anchor the fictional.  For me it makes the fictional feel more real.