That's where it's shot, but it's highly doubtful that LA is where it actually takes place. Officially, we just don't know. If it is in California, I tend to think it's more to the south; we would have had more clues if it were LA.
In Mini Bike, Malcolm wanted to take Craig "all the way across town" for ice cream. LA is pretty large and that wouldn't be practical. I live in Green Bay, which is 100,000 people, roughly about 20 miles by 20 miles; it's practical to drive "all the way across town" there in around 30-45 minutes, so I tend to think the town is a bit smaller than LA.