US existing-home sales fell to their lowest level in seven months in January, industry data showed Friday, highlighting ongoing woes for a sector that was at the epicenter of the financial crisis.

The National Association of Realtors (NAR) said sales of single-family and townhomes and condominiums dropped 7.2 percent to a seasonally adjusted annual rate of 5.05 million units in the first month of the year.

It was the lowest reading since June last year as buyers took a breather from a first-time homebuyer tax credit provided by the government.

Most analysts had expected around 5.50 million units compared with a revised 5.44 million units sold in December.

The January sales were however 11.5 percent above the 4.53 million-unit level in the same month in 2009, when the sector was engulfed in the home mortgage meltdown.

Lawrence Yun, NAR chief economist, said the latest monthly sales decline was "not encouraging, and raises concern about the strength of a recovery."

"Activity should be picking up strongly in late spring as buyers take advantage of the tax credit, which is critical to absorb distressed properties reaching the market and to continually chip away at inventory," Yun said.

"With a downtrend in the number of homes on the market, especially in the lower price ranges, values are beginning to firm but with great variance around the country."

Analysts saw the January figure as a bad start for the year, especially as the economy begins to emerge from a prolonged recession following a financial crisis arising from the home mortgage meltdown.

"January is bringing little good news for the housing market, and today's existing-home sales report adds to the gloom," said Celia Chen of Moody's Economy.com, citing lack of enthusiasm by first time homebuyers for the tax credit as behind some of the drop-off in sales.

According to a NAR survey, first time homebuyers comprised only 40 percent of sales in January, the lowest share since last July. The share had reached 51 percent in November.

Analysts still expect sales to surge in the rest of the year.

"We still expect sales to rise strongly over the next few months, but drop in sales in November and December and the rise in supply will likely push prices back down," said Ian Shepherdson, chief US economist for High Frequency Economics.