I'm a MS4 going through the whole residency application process. Regional preferences really only come into play for certain competitive areas (ie California). If you know you want to do a residency in CA, attending a CA med school probably offers some advantage. In other parts of the country it's generally not a big deal. Many med schools do offer some favoritism in taking their own students for residency. Contrary to popular belief, where you go to med school does have a strong influence on where you will be competitive in applying for residencies. Don't take the decision lightly.