On The Money: Interview with Realtor Creg McDonald

February 13, 2018 | Paul R. Ruedi CFP®
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On today's episode of "On the Money," Paul Ruedi hosts special guest realtor Creg McDonald of The McDonald Group for a discussion about the local real estate market and how real estate relates to personal finance.


Paul Ruedi and Dr. Fred Giertz on the economy and recent market volatility: (1:04 -7:44)

On the Regularity of “Corrections”

“You used to talk about (temporary declines) like the cross-town bus; the cross-town bus has been late.”

- Dr. Fred Giertz


Listener Question:  How can you say a decline like this is “health-restoring?”   Can you please explain to me how losing money is healthy? (7:45 – 17:24)

Is a Decline a Loss?

"The financial media has done a great job of telling people when stocks prices decline, that it’s a loss.  When I got in this business the Dow was at 1,000.  They were celebrating a couple weeks ago when the down was at 24,600; now there are people in the streets panicking because the Dow is at 24,600.  But this is the psychology of it all. 

But to create a loss in a broadly diversified stock portfolio that is held for a lifetime takes human intervention; somebody has to confuse a temporary decline for a permanent loss, panic, and sell, that’s how you create losses."

-Paul A. Ruedi

The Price of Higher Returns

"The volatility is the price you pay for these excess returns.  The so-called equity premium - in the long-term you usually gain more from stocks than investing in fixed income.  The price you pay is this kind of uncertainty."

- Dr. Fred Giertz

On Expecting Temporary Declines

"These types of declines, and even worse, should be expected annually.  If you can’t deal with that, you don’t belong in the great companies of America and the world."

- Paul A. Ruedi


Interview with Realtor Creg McDonald (17:25 – 50:20)

On the Stability of the Champaign Real Estate Market

"We’re not in Florida; we don’t get the historical run-ups of properties and deflation of properties overnight.  We’re a stable, Midwestern-type community, that has a basis tied very much to the University of Illinois.  As long as the University of Illinois does not come crashing down, we are going to have a fairly solid real estate market."

- Creg McDonald

Almost a Decade Later, Have We Fully Recovered from the Crash?

"From 2009 until the end of the crash - when we started our business (what a great time to start a real estate business!)  - we did see around a 10% decline at the higher end, maybe even some more than that.  As we sit here today, those losses have been regained for the most part."

- Creg McDonald

On Trends in the Champaign Real Estate Market

"Paul, you lived through when we all lived in the center part of town, then the mass exodus to the southwest side of town because we could build bigger, more grandiose houses on bigger lots.  We are almost seeing reverse now, that people are moving back towards the center of Champaign."

- Creg McDonald

On Investing in Home Improvement Projects

"All projects aren’t created equal.  From just a standpoint of what will you get back the most – kitchen and master baths.  And why?  Where do we mostly live?"

- Creg McDonald

On Capital Gains when Selling a House

“I get this question a lot from clients – they are wondering, am I going to owe taxes on my gains when I sell my house?  Most often, the answer is no, because of there is this capital gains exclusion on personal homes.

The amount is $250,000 per person, or $500,000 for a married couple.  Chances are unless you have a really big house it will be hard to exceed these limits.  The qualification rules: you have to live in the house 2 of the last 5 years, and use it as your principal residence.”

- David Ruedi

On Affording Your House

 “Just because you can pay for something doesn’t mean you can afford it.”

- Paul A. Ruedi

Should I Borrow the Maximum Amount?

"The way that the bank determines how much they are going to lend you is essentially the maximum amount they will lend you before they are too worried before you are not going to pay them back.  That does not mean it’s a good financial decision for you.  Chances are if you go to the bank and ask how much can I qualify for and they give you that number; chances are you should not be borrowing that full amount if you want to still have a decent amount of discretionary spending for your lifestyle beyond just housing expenses."

- David Ruedi

On the Impact of Rising Interest Rates

"There are 2 sides, there’s buyers side, and a sellers side. 

Every time interest rates go up, that buyer can afford less home.  So today they can buy more house than they can if they wait 6 months and rates are 5%.

From the seller side, as you are thinking about putting the home on the market. there are more buyers right now at this, if you believe interest rates will go up, than there will be in your house in 6 months, as they go up.

Because the future holds potentially higher interest rates, it’s allowing us to be more aggressive from the buyer side because they want to lock it in, and on the seller side because they have more people to buy (their home)."

- Creg McDonald


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It’s important to recognize that past performance is not an indication of future results.

You should not make any investment decisions without first consulting your own financial advisor and conducting your own research and due diligence.