NEW YORK (Reuters) - Hurricane Irene lashed New York with heavy winds and driving rain on Sunday, flooding some of Lower Manhattan's deserted streets and large parts of the northeast, but the feared major devastation was avoided as the storm lost some of its punch.
Irene was downgraded to a tropical storm on Sunday morning after marching up the East Coast, leaving 11 dead, as many as 3.6 million customers without electricity, forcing the closure of New York's mass transit system, and the cancellation of thousands of flights.
"It's safe to say that the worst of the storm up to and including New York and New Jersey has passed," Homeland Security Secretary Napolitano said late Sunday morning as the sun started to peek through the clouds in New York City.
She said pre-storm preparations dramatically reduced the loss of life, but warned that river flooding across the eastern seaboard posed a danger.
While weakened, the swirling storm still packed a wallop, sending waves crashing onto shorelines and flooding coastal suburbs and broad swathes of New Jersey, where residents reported basements full of water and numerous trees down.
There was about a foot of water in the streets at the South Street Seaport in Lower Manhattan before the tide began receding. There appeared to be less damage than many had feared, and New Yorkers shrugged it off.
"It's not bad as they said it would be. The streets are flooded but not as bad as I thought," said John Harris, 37, who defied an evacuation order and stayed home overnight in the Rockaways.
Wall Street's financial district seemed largely unaffected as did Ground Zero, where the 10th anniversary of the Sept. 11 attacks is soon to be observed. The New York Mercantile Exchange building planned to open as usual on Monday, while the New York Stock Exchange and Nasdaq Stock Market also said they expected a normal trading day.
But the big question for residents and the millions who commute to work in the city each day, was whether the city's subways and public transportation would be allowed to resume in time for Monday's rush hour after being closed from noon on Saturday.
About 370,000 city residents were ordered to leave their homes in low-lying areas in an unprecedented move by the authorities. It was unclear when they would be allowed to return.
Heavy rains and wind forced the closure of three bridges leading to the Rockaways peninsula facing the Atlantic Ocean, and further east on Long Island sand berms built to hold off the flooding and protect coastal businesses appeared to have failed. Six inches of rain fell on Central Park.
Irene was blamed for at least 11 deaths in North Carolina, Virginia, Florida and Maryland as it churned up the East Coast.
By 11 a.m. EDT (1500 GMT) Irene's winds had diminished to 60 mph (95 kmh) and the center had reached Danbury, Connecticut, about 70 miles (112 km) northeast of New York.
There was a general sense in New York that the storm, reported on breathlessly for days by television reporters, was not as bad as it could have been.
"The water looks really groovy, it's like in that movie 'The Perfect Storm,' -- it's swelling every way and the wind is blowing it every way, it's heaving," said Jill Rubenstein, speaking from her third-floor apartment in an evacuation zone at the Harlem Yacht Club on City Island in the Bronx.
New York City's normally bustling streets were mostly quiet overnight but as the waters receded, tourists and locals began venturing out for a look around New York's Times Square, where Broadway shows had been canceled in anticipation of the bad weather.
In Astoria, Queens, about a dozen people were out on the waterfront overlooking Manhattan, some snapping photographs of a partially flooded playground.
The storm dumped up to eight inches of rain on the Washington region, but the capital avoided major damage. Some bridges were closed but airports remained open and transit operated on a normal schedule.
Rick Meehan, mayor of Ocean City, Maryland, said initial assessments showed flooding and continuing power outages in some areas of the seaside resort, but not much damage.
"It looks like we dodged a missile on this one," Meehan told the local Fox News station, WBOC News.
New Jersey Governor Chris Christie told NBC's "Meet the Press" he expects damages from Irene to be costly, possibly worth billions of dollars, along the Atlantic coast and from inland river flooding.
The Federal Emergency Management Agency said it could take several days to make preliminary damage assessments.
On the south shore of Long Island, Jim Nolan, a 55-year-old architect, was out making his own assessment of the area around his home on the shore of a lagoon at Copiague. But downed trees and flooding stopped him from driving very far.
"It was about as bad as I expected," he added of the storm. "The more scientific weather channels had a tropical storm, the high end news companies had doom and gloom reports of 80 to 90 miles an hour -- I just didn't believe it."
He had a busy night taking care of his 34-foot cabin cruiser tied to a dock by a number of lines that broke during the night. "About 3 O'clock two snapped, two snapped about four or five o'clock and one snapped half an hour ago," Nolan said. "It was nice and warm so I put my bathing suit on and went out there to work on it with my son," Nolan said.
From the Carolinas to Maine, tens of millions of people were in the path of Irene, which howled ashore in North Carolina on Saturday, dumping torrential rain, felling trees and knocking out power. The storm was forecast to pass over parts of Massachussets and Rhode Island later on Sunday.
After Irene, weather watchers were keeping an eye on Tropical Storm Jose, which formed near Bermuda.
This year has been one of the most extreme for weather in U.S. history, with $35 billion in losses so far from floods, tornadoes and heat waves.