Tropical storm Irene is swirling away from New York City after battering the area with heavy winds and rain as the evacuation order was lifted on Sunday afternoon.

The more than 370,000 New York residents — living mainly in lower Manhattan, Brooklyn and Queens — were allowed to return to their homes as of 3 p.m. on Sunday afternoon.

"The good news is the worst is over and we will soon move to restore and resume mode," Michael Bloomberg told reporters at an afternoon news conference.

He said Irene inflicted significant damage, with serious flooding in some areas and retaining walls collapsing in some places, but that overall, New York is in "pretty good shape."

"Whether we dodged a bullet or you look at is and said, ‘God smiled on us,' the bottom line is I'm happy to report, there do not seem to be any deaths attributable to the storm," he said.

The enormous storm, which at one point had a wingspan of 805 kilometres, has been churning north along the United States' East Coast all weekend.

Irene is responsible for knocking out power to millions of homes and killing at least 15 people. One private estimate said the storm caused up to $7 billion in damage.

Though the wind and rain accompanying Irene managed to wash out streets and cut power in 62,000 households, Bloomberg said it won't be long until the city returns to business as usual.

"The dangers of additional flooding have been eliminated and existing flooding should start to go down."

Crews are working to restore power to affected homes while the city's parks department is out picking up the remains of fallen trees, Bloomberg said.

The mayor added that the storm did not affect the site of a 9/11 memorial building that will be unveiled in September.

Chairman of the Metropolitan Transportation Authority Jay Walder said it is not clear when service on the city's subway system will be restored.

He said some of the train yards were underwater Sunday.

"I think it's fair to say you're going to have a tough commute in the morning," Bloomberg said.

Bloomberg capped off the conference by thanking thousands of New York residents for obeying an evacuation order in the city's low-lying areas.

But not all residents obeyed the evacuation order. Many opted to stay home during the storm, reported The Associated Press.

Vigilance encouraged

Though Hurricane Irene has waned to a tropical storm, the U.S. Secretary of Homeland Secretary warned Sunday that dangers still remain as it spins north along the nation's East Coast.

"Downed power lines, flooding, generator issues and fallen trees are just some of the dangers that exist after a storm," Janet Napolitano told reporters at news conference early Sunday afternoon.

Napolitano said she believes that the worst of the storm has passed but it is still important for residents along the eastern seaboard to be vigilant.

"No matter where you are this morning from North Carolina to Maine we encourage you to stay off the road as much as possible," she said adding that emergency crews are still assessing damaged areas.

U.S. President Barack Obama and top officials in his administration have been briefed on the storm response and recovery process, said Napolitano.

Obama said people should continue to listen to the guidance of their state and local officials in the coming days.

"One of our chief concerns was the possibility of significant flooding and widespread power outages," he said at press conference on Sunday afternoon.

He said that there are still Americans struggling. "It could get worse. I want people to understand that this isn't over."

Once a hurricane, Irene's winds fell to 104 kph as the storm made its landfall on New York's Coney Island at about 9 a.m. on Sunday, according to the U.S. National Hurricane Centre in Miami.

NYC landfall

But even with weaker winds, Irene's arrival in New York City was aggressive.

Heavy overnight rainfall overwhelmed NYC's sewers and sent water spewing into city streets, officials confirmed. Seawater from New York Harbor hugged the sidewalk at Battery Park while waves washed into the Rockaways, an evacuated peninsula in Queens.

CTV News writer Sumran Bahn was in New York City during the worst of the storm and said that Irene brought the city to a standstill.

Bahn said she noticed the buildings around New York had boarded up their windows. She said she saw sewer grates with sandbags on them.

"I've been here a few times and I've never seen it shut down like that," she told CTV News Channel on the phone from New York City on Sunday morning.

A Canadian graduate student living in the city said that now life is getting back to normal in New York after the storm.

"I was just taking a stroll and people are outside and children are playing," Hema Parmar told CTV News Channel on Sunday afternoon. "In this part of the town it's pretty much back to normal, but it is pretty windy."

She said the storm, her first experience with a hurricane, left the city feeling very empty.

"I've never sent the city as quiet as it was last night," she said. "It really was a ghost town."

Now that Irene has become less powerful, Bahn said she sees traffic starting to build. She also said she notices that more and more pedestrian traffic outside.

The storm made its dreaded U.S. landfall just after dawn on Saturday, slamming into Cape Lookout, North Carolina. Floodwaters crept from North Carolina to Delaware. Thousands of East Coast flights were grounded. Millions of homes and businesses around Virginia went dark as the storm cut off power.

Emergency preparedness

Anticipating Irene's arrival, New York City officials spent the weekend advising residents to stay indoors and wait out the storm. The city shut its transit system on Saturday and closed all airports. Broadway shows, baseball games and other events were all cancelled or postponed.

NBC reporter Steve Handelsman said that normal life in the city — even the normally-bustling Times Square — momentarily breached to a halt this weekend.

He spoke to CTV News Channel on Sunday morning from the heart of the city.

"Talk about eerie. This is Times Square where as most Canadians know there is activity 24/7, 365. But not this morning, this place is almost deserted," he said.

Forecasters feared that a storm surge on the fringes of Lower Manhattan could send seawater streaming into the maze of underground vaults that hold the city's cables and pipes, knocking out power to thousands.

Before weakening to a tropical storm, Irene was the first hurricane to make landfall in the continental United States since 2008. Irene arrived almost six years to the day after Katrina ravaged New Orleans.

With files from The Associated Press