The parts of the city portrayed are worse than they are portrayed in many ways. The city overall is obviously better on the whole, since they intentionally focus on the problem areas. David Simon directly stated both of these things in "Truth Be Told," a book about The Wire.
The Wire is, however, as realistic as any fictional show has been on the topics it discusses. In fact, many of my favorite characters and scenes were based on real situations. There was a real life Bubbles, Bunk, etc. And Melvin Williams, who plays the deacon seen from time to time, was an infamous drug kingpin in Baltimore before serving a long sentence in prison. He was also among the best pool players in the region, which is why you sometimes see him playing pool.