(fxcue news) - The National Association of Home Builders released a report on Wednesday unexpectedly showing a slight improvement by U.S. homebuilder confidence in the month of April. The report said the NAHB/Wells Fargo Housing Market Index inched up to 40 in April after falling to 39 in March. Economists had expected the index to dip to 37. With the unexpected increase, the housing market index regained ground after hitting a seven-month low in the previous month. "The recent dip in mortgage rates may have pushed some buyers off the fence in March, helping builders with sales activity," said NAHB Chairman Buddy Hughes. He added, "At the same time, builders have expressed growing uncertainty over market conditions as tariffs have increased price volatility for building materials at a time when the industry continues to grapple with labor shortages and a lack of buildable lots." The uptick by the headline index came as the index gauging current sales conditions rose to 45 in April from 43 in March and the gauge charting traffic of prospective buyers increased crept up to 25 in April from 24 in March. Meanwhile, the report said the component measuring sales expectations in the next six months fell to 43 in April from 47 in March. "Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions," said NAHB Chief Economist Robert Dietz. He added, "The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs." The NAHB said 60 percent of builders reported their suppliers have already increased or announced increases of material prices due to tariffs. On average, suppliers have increased their prices by 6.3 percent in response to announced, enacted, or expected tariffs, the NAHB continued, noting this means builders estimate a typical cost effect from recent tariff actions at $10,900 per home. The report also said the latest HMI survey revealed 29 percent of builders cut home prices in April, unchanged from March. The average price reduction was also unchanged from the previous month at 5 percent. On Thursday, the Commerce Department is scheduled to release its report on new residential construction in the month of March. Economists currently expect housing starts to slump to 1.420 million in March after surging to 1.501 million in February, while building permits are expected to dip to 1.450 million in March after falling to 1.456 million in February.