By Daniel Trotta and Basil Katz
NEW YORK (Reuters) - Hurricane Irene lashed New York with heavy winds and driving rain Sunday, knocking out power and flooding some of Lower Manhattan's deserted streets but so far the feared major devastation was avoided as the storm lost some of its punch.
Irene was downgraded to a tropical storm Sunday morning after marching up the East Coast, leaving 11 dead, as many as 3.4 million households without electricity and forcing the cancellation of thousands of flights.
While weakened, the swirling storm still packed a wallop, sending waves crashing onto shorelines and flooding coastal suburbs.
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 York's gritty residents shrugged it off.
"It's not bad as we 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 September 11 attacks is soon to be observed. The New York Mercantile Exchange building planned to open as usual Monday.
But the big question for New Yorkers 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. Subways had been halted and low-lying areas evacuated ahead of the storm.
BEACH DAMAGE
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 northeast of New York.
There was a sense 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 after authorities ordered tens of thousands of residents to evacuate low-lying areas and shut down its subways, airports and buses.
But as the waters receded, tourists began venturing out for a look around New York's Times Square, where Broadway shows had been canceled in anticipation of the bad weather.
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.
BAD YEAR FOR U.S. STORMS
From the Carolinas to Maine, tens of millions of people were in the path of Irene, which howled ashore in North Carolina Saturday, dumping torrential rain, felling trees and knocking out power.
After Irene, weather watchers were keeping an eye on Tropical Storm Jose, which formed near Bermuda.
New York Mayor Michael Bloomberg had warned New Yorkers Irene was a life-threatening storm and urged them to stay indoors to avoid flying debris, flooding or the risk of being electrocuted by downed power lines.
In midtown Manhattan, there was a substantial police presence on the streets but most people heeded Bloomberg's warning to stay inside.
About 370,000 city residents were ordered to leave their homes in low-lying areas ahead of Irene's arrival, many of them in parts of Brooklyn, Queens and Manhattan.
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.
President Barack Obama, who cut his vacation short on the Massachusetts island of Martha's Vineyard to return to the White House, was keeping a close eye on preparations for the hurricane.
(Additional reporting by Pascal Fletcher in Miami; Joe Rauch and Jim Brumm in Wilmington, N.C.; Tom Hals in Delaware; Claudia Parsons, Basil Katz and Jonathan Allen in New York; Alistair Bell, Malahti Nayak, Andy Sullivan, David Morgan and Lisa Lambert in Washington; Andrea Shalal-Esa in Ocean City; Michael Fitzpatrick in Long Branch, New Jersey. Writing by Steve Holland, Editing bhy Jackie Frank)
