Short-seller Chanos eyes more housing sector woes

NEW YORK (Reuters) - Problems in the housing sector are likely to deepen and cause damage among financial institutions that loaned the industry money, a prominent hedge fund manager said on Wednesday.

"I think we'll continue to be surprised by the extent of the problems in the sector," James Chanos, president of Kynikos Associates, told the Reuters Hedge Funds and Private Equity Summit in New York.

Chanos, whose fund specializes in selling stocks short or betting their price will fall, said he was concerned about what he called "questionable accounting" at the home builders and the weak disclosure they provide to investors.

"The surprises continue to be negative," said Chanos, who also runs a hedge fund industry trade group called Coalition for Private Investment Companies.

He expects "the financial institutions" to bear the biggest brunt of the fallout at a time when the U.S. housing sector has taken a hit from slumping orders for new homes and a growing number of U.S. borrowers falling behind on payments on riskier mortgages.

As a group the home builders have lost about 18 percent of their value this year, according to the Dow Jones U.S. Home Construction Index .DJUSHB.

Chanos' comments echoed what other investors have said at the summit. On Tuesday Jim Rogers, who helped found the Quantum Fund with George Soros, said he is shorting the housing sector.