Sales of existing homes unexpectedly fell in January to the lowest level in nearly 12 years as buyers delay their purchases in anticipation of government programs to help revive the U.S. housing market.

The National Association of Realtors said Wednesday that sales of existing homes plunged 5.3 percent to a seasonally adjusted annual rate of 4.49 million units in January from 4.74 million units in December.

January sales were the weakest since July 1997 and analysts say that sales will decline further as they believe that the bottoming out will happen later this year.  Sales had been expected to rise to an annual rate of 4.79 million units, according to a survey of economists compiled by Briefing.com.

"Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus," said Lawrence Yun, the chief economist of NAR, in a statement. But sales are expected to pick up in the coming months as prices continue to fall and interest rates ease, Yun added.

The median sales price for existing home fell to $170,300 in January, down 14.8 percent compared to last year’s figure the second-largest year-over-year price decline recorded and the lowest median sales price since March 2003.

Despite the decline in sales, the inventory of unsold homes dropped 2.7 percent to 3.6 million existing homes from 3.68 million in December.  At the current sales pace, it would still take an estimated 9.6 months to sell down 3.6 million homes, up from 9.4 months in December, the report said.

"The drop in total inventory is an encouraging sign because the number of homes on the market has declined steadily since peaking in July 2008, and inventory is at the lowest level in two years," Yun said.

Foreclosures have flooded the market more particularly in the distressed Sun Belt states like California, Florida, Nevada and Arizona. NAR estimates that about 45 percent of sales nationwide are foreclosures or other distressed properties.