NEW YORK (Reuters) - U.S. average home prices rose 7.97 percent in 2003 from 2002, driven by strong housing demand and historically low mortgage rates, the Office of Federal Housing Enterprise Oversight (OFHEO) said on Monday.

This increase marked the fourth straight year in which average home prices climbed more than 7.5 percent across the country, OFHEO said.

Home price growth accelerated in the last quarter of 2003, rising 3.67 percent, more than 2 percentage points higher than the increase in the third quarter, the financial regulator of mortgage finance giants of Fannie Mae and Freddie Mac said in a statement.

"The fourth quarter surge is particularly impressive right now because it comes on the heels of much more moderate increases earlier in the year," said OFHEO director Armando Falcon.

During the last quarter of 2003, all but two states saw price increases and even states that had been lagging the national average experienced a substantial pickup in home appreciation, according to the regulator.

The biggest price increases during the past year took place in Rhode Island, California, and the District of Columbia, and the smallest rises in Utah, Texas and Colorado, it said.

Robust home appreciation, plus low rates, also have enticed a flood of cash-out refinancings, a key cash source for consumers in an uneven U.S. economy.