(Adds quotes from evacuee, new position, agricultural impact)
PANAMA CITY, Fla., Oct 11 (Reuters) - Hurricane Michael's assault on the Florida Panhandle left nothing more than empty foundations and heaps of rubble in some parts of the small towns it crashed into with near-record force.
Communications outages and roads blocked by downed trees, strewn power lines and debris made it difficult to get an overall assessment on Thursday of the damage wrought by Michael, but the initial picture was grim.
Michael smashed into Florida's northwest coast near the small town of Mexico Beach on Wednesday with screeching 155 mile per hour (250 kilometers per hour) winds, pushing a wall of seawater inland.
The sky cleared on Thursday. Some residents with destroyed or damaged homes counted themselves lucky to have survived.
Linda Burton returned to Parker, a town of about 4,300 northwest of Mexico Beach, from a storm haven in Alabama to find her motorhome had been destroyed by falling trees.
"This is the worst it's ever been," she said. "We're happy to be alive."
Video shot by CNN from a helicopter showed homes closest to the water in Mexico Beach had lost all but their foundations. A few blocks inland, about half the homes were reduced to piles of wood and siding and those still standing suffered heavy damage.
Michael, the third most powerful hurricane ever to hit the U.S. mainland, weakened overnight to a tropical storm and pushed northeast on Thursday, bringing drenching rains to Georgia and the Carolinas, which are still recovering from Hurricane Florence last month.
Michael killed at least two people - a man who died when a tree toppled onto his house in Florida and a girl who died when debris fell into a home in Georgia, officials and local media said.
Brock Long, head of the Federal Emergency Management Agency, called Mexico Beach, which has a population of about 1,200, "ground zero" for the hurricane damage.
Officials were concerned to help people who could be trapped in various areas along the coast, he told a news conference. The area is known for its small coastal towns and wildlife reserves.
Long said several hospitals in the Panhandle were hit by the hurricane and patients had to be evacuated.
In Panama City, 20 miles (32 km) northwest of Mexico Beach, buildings were crushed and boats were scattered around. Michael left a trail of utility wires on roads, flattened tall pine trees and knocked a steeple from a church.
Al Hancock, 45, who works on a tour boat, survived in Panama City with his wife and dog.
"The roof fell in but we lived through it, he said.
Nearly 850,000 homes and businesses were without power in Florida, Alabama, the Carolinas and Georgia on Thursday.
DAMAGE 'WAY WORSE' THAN EXPECTED
Florida Governor Rick Scott told the Weather Channel the damage from Panama City down to Mexico Beach was "way worse than anybody ever anticipated.
At Jinks Middle School in Panama City, the storm peeled back part of the gym roof and tore off one wall, leaving the wooden floor covered in water. A year ago the school welcomed students and families displaced by Hurricane Maria in Puerto Rico.
The kids live nearby. The second floor of some apartments are just gone. Roofs are gone, Principal Britt Smith told CNN after talking by phone with those who did not evacuate.
Michael, a Category 4 storm on the five-step Saffir-Simpson hurricane intensity scale when it came ashore, was causing flash flooding on Thursday in parts of North Carolina and Virginia, where some areas could get as much as could get as much as 9 inches (23 cm) of rain, the National Hurricane Center said.
By 2 p.m. EDT (1600 GMT), the storm had pushed northeast to within 25 miles (40 km) of Greensboro, North Carolina, carrying 50-mph (85-kph) winds, the NHC said.
Thousands of people hunkered down in shelters overnight after fleeing their homes ahead of the storm. An estimated 6,000 people evacuated to emergency shelters, mostly in Florida, and that number was expected to swell to 20,000 across five states by week's end, said Brad Kieserman of the American Red Cross.
Michael pummeled communities across the Panhandle and turned streets into roof-high waterways.
Twenty miles (32 km) south of Mexico Beach, floodwaters were more than 7 feet (2.1 meters) deep near Apalachicola, a town of about 2,300 residents, hurricane center chief Ken Graham said. Wind damage was also evident.
"There are so many downed power lines and trees that it's almost impossible to get through the city," Apalachicola Mayor Van Johnson said.
Brad Rippey, a meteorologist for the U.S. Agriculture Department, said Michael had severely damaged cotton, timber, pecan and peanuts, causing estimated liabilities as high as $1.9 billion and affecting up to 3.7 million crop acres (1.5 million hectares).
Michael also disrupted energy operations in the U.S. Gulf of Mexico as it approached land, cutting crude oil production by more than 40 percent and natural gas output by nearly one-third as offshore platforms were evacuated. On Thursday, oil producers were checking production platforms and beginning to return crews to more than 90 offshore facilities that had been evacuated.
With a low barometric pressure recorded at 919 millibars, the measure of a hurricane's force, Michael was the third strongest storm on record to hit the continental United States, behind only Hurricane Camille on the Mississippi Gulf Coast in 1969 and the Labor Day hurricane of 1935 in the Florida Keys.
(Reporting by Rod Nickel in Panama City, Florida Additional reporting by Devika Krishna Kumar in Tallahassee, Florida; Gina Cherelus and Scott DiSavino in New York; Dan Whitcomb in Los Angeles; Brendan O'Brien in Milwaukee, Gary McWilliams and Liz Hampton in Houston, Andrew Hay in New Mexico and Humeyra Pamuk in Washington Writing by Bill Trott Editing by Frances Kerry)