The body of the man, named locally as taxi driver Michael Atherton, and those of the three women were found in "close proximity" downstairs in the semi-detached house in Greenside Avenue, Horden, Peterlee, after police were alerted to shots being fired shortly before 11.45pm last night.
Police confirmed that a teenage woman who suffered minor injuries escaped through an upstairs window. Other people in the house at the time also survived, including a man who was initially arrested but later released without charge, police added.
One of the dead women was named locally as Susan McGoldrick.
Police did not release the names of the victims, but Durham Police assistant chief constable Michael Banks told a news conference that a resident at the address was the "lawful holder" of shotgun and firearms licences.
He said these were for three shotguns and three "section one" firearms, a category requiring greater authorisation than a shotgun licence.
The revelation is likely to spark renewed debate over whether to further tighten Britain's gun licensing laws.
Police could not confirm at this stage whether any of those lawfully held weapons had been used in the shooting, Mr Banks said.
"This is a tragic event. We have four people who died late last night and our thoughts and feelings are with their family and friends at this moment," he said.
"I would like to reassure our communities that the police are in control of this incident.
"At this moment, we are looking for no-one else in relation to this inquiry."
He said just before 11.45pm yesterday a number of calls were made to the police control room to report that shots had been fired at an address in Greenside Avenue, in Horden, Peterlee.
"Our information within those numerous messages was that several people had been shot," he said.
"The police were dispatched to the scene and shortly after midnight, as our officers entered the house, it was discovered that a man and three women were dead in the house.
"It is our belief at this stage that they died of gunshot wounds."
Detective Superintendent Paul Goundry said all the deceased were related. Police have said that a shotgun was found next to the 40-year-old man's body.
Mr Goundry revealed that police had had "minor contact" with the family in the past.
He added that police were working closely with family and friends and a full forensic team was at the house seeking to establish exactly what had happened.
"At this stage we are not looking for anyone else," he said.
"It is very early stages in the investigation. My priority is to identify the individuals in the house and I am working very closely with friends and family to establish that."
Mr Goundry said there had been other people in the house who were now being interviewed.
He said there had been an initial arrest of a male at the house who has since been released with no further action. This person was being treated as a significant witness.
Mr Banks said of the man found dead in the house: "We believe he may be a member of a gun club. We're still researching that."
Police said they encountered the family prior to this incident, back in 2008.
"We have had contact with the family. We are busy reviewing the exact circumstances around that. There was a report of a male at that address self-harming. That was some years ago. We are researching all of this," said Mr Banks.
"There were words. There was nothing came from that."
Mr Goundry added: "In relation to the incident we will be looking to make a voluntary referral to the IPCC (Independent Police Complaints Commission).
Neighbours spoke of their shock at the incident.
One woman, who did not want to be identified, said: "I always called them Mike and Sue. I am devastated, totally devastated. Two nice people, I did not think anything like this could happen.
"We are all just shocked, just stunned. There are no other words to describe it. I cannot believe that four people died there.
"He (Atherton) was very nice, kind and considerate. We both shared the same drive with our cars and, if he saw you, he would open the gate.
"He was nice, so was she. I have just been taking my cards down and I had a Christmas card from them."
Robert Bailey, 72, a long-standing resident of Greenside Avenue, said he knew the people involved only by sight, and they had appeared "normal, ordinary people".
PA
