I'm writing a realistic story that takes place in 2007. It's completely real, no fantasy, science fiction, etc. However, I've ran into problems with choosing a setting. I have a very distinct idea of what the town my main character lives in would be like and no matter how much I research, I can't find what I'm looking for. On top of that, I don't want to chose a place and risk portraying it incorrectly. Is it okay to make up a town in a realistic story?
Yup. Make it up! Although you should probably ask yourself WHY you can't find a town that matches your criteria. The town you make up for your book should be realistic, a town that could exist somewhere, so hopefully you'll look at whatever your criteria are and make sure they make sense together.
My rule of thumb is: if the story takes place in a city, I use an actual city, but if it's a town, I base it on an existing town and change the name. As for not being able to find the right place (town, I'm assuming) I'd say get as close as you can geographically (based on attitudes in that area) and then make up a town. And if you're concerned about rubbing someone the wrong way, don't mention the state, province, country or whatever.
You could follow the lead of a lot of writers, who start their realistic story with a fictional narrator saying that the following story is true (this is OK, since we know that the narrator himself is fictional), but the names have been changed to protect the innocent. The fictional narrator can add that not only the characters' names have been changed, but also the location.
Is the story a real story? Why does the town have to be really if the story is not...? Hmmm does that make sense? I would make it up, I made up a town in my book but like they have said, why can't you find a town that matches your criteria?
Two that spring to mind are Stephen King's Jerusalem's Lot, Maine and H.P. Lovecraft's Dunwich, New England.
I've done this a few different ways. 1) My first novel I had no idea where the story was taking place. I kind of had a vibe for a locale (midwest, maybe near Chicago) but having not ever spent time there I was reluctant to try to describe a place I had never been. In that book I actually never used place names at all; I simply said 'city' or 'country' or that a character's parents 'moved down south'. I really left it up to the reader to place where the story happened (because ultimately it didn't really matter). 2) Next novel I had a region (western Pennsylvania) that I knew reasonably well but didn't know any of the towns in the geographical area intimately. I instead made up a blend of several small towns I have visited and used a made up name that sounded like it would be real (Clement). All other places in the book actually existed (Plymouth and Cleveland, Ohio and Pittsburgh, PA). 3) Novel #3 I used all real places with most of the action occurring in Vineland, NJ (a place I've visited several times). I also made extensive use of Google maps and street views to describe areas or places within the city. If I couldn't find an exact location I made one up as a composite of similar real places. 4) Novel #4 that I'm working on now takes place in an intentionally fictitious town in South Carolina. It is a blend of a couple of little towns I researched online but I wanted a fictitious name because the city government and law enforcement are all corrupt. Certainly don't want to badmouth an existing town that way. The name I invented is a bit ultra-fictitious, sort of like the one for the TV series Banshee. The slightly absurd town name sets the tone for a book that will be a bit over the top on the believe-ability meter; it is more of a zesty romp than a serious work. Another author friend of mine published his first novel that takes place in a fictitious town...in a fictitious state. Set in the American southwest, the author made up a whole new state ("the untamed state" being its motto) which opens the door for doing whatever he wants but in a way that still seems familiar and realistic.
Midsomer Murders ...The stories are set in modern-day England and revolve around Tom Barnaby's (later, John Barnaby's) efforts to solve numerous murders that take place in the idyllic picturesque but deadly villages of the fictional county of Midsomer
Of course. The town in my book is a combo of the the town I grew up in and the town i live in now. I even combined the names.