Milder conditions were helping firefighters after unseasonably hot temperatures and strong winds on Thursday fanned flames across the parched landscape and threatened towns surrounding Sydney.
Rural Fire Service spokesman Matt Sun said the number of fires in New South Wales state had dropped from more than 100 overnight to 89, burning across 97,000 hectares (375 square miles). But 25 continued to burn out of control, he said.
Eighty-one homes were destroyed and another 37 damaged, the fire service said, with the number expected to rise as assessment teams and police move deeper into the destruction zone.
Roads and schools in the worst-hit areas were closed and officials were searching the rubble for survivors and victims. Prime Minister Tony Abbott said hundreds of homes may have been destroyed, but the exact number was still not known.
"I know some information that's been passed to me that just in one street, there were 40 homes lost," Rural Fire Service Deputy Commissioner Rob Rogers told Nine Network television.
Blue Mountains Mayor Mark Greenhill visited the devastated village of Winmalee, on Sydney's western fringe, where some streets were almost entirely razed.
"It's been an awful 24 hours for the Blue Mountains" region, Greenhill told Nine. "We've lost possibly scores of homes."
The Fire Service said a 63-year-old man had a fatal heart attack while he was fighting a fire at his home at Lake Munmorah, north of Sydney, late Thursday. The man was identified by friends as Walter Linder.
Firefighters had evacuated most of the residents and their horses from the area, but a few decided to stay to protect their homes, neighbor Sue Cartwright said. Linder and a friend tried to defend their property with buckets of water. The two men split up at one point during the battle and Linder's friend later found him lying on the ground with no pulse, she said.
"It's pretty scary at the moment," she said. "I'm surprised that more lives haven't been lost considering the scale of it up here."
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Two people suffering from smoke inhalation were in intensive care at Sydney's Concord Hospital on Friday, hospital spokeswoman Kate Benson said. Three firefighters were also treated for burns, officials said.
Wildfires are common in Australia, though they don't tend to pop up in large numbers until the summer, which begins in December. This year's unusually dry winter and hotter than average spring have led to perfect fire conditions.
"We're not called the land of droughts and flooding rains -- the sunburnt country -- for nothing," the prime minister told reporters in Winmalee, referring to Dorothea Mackellar's century-old patriotic poem about Australia, "My Country."
In February 2009, wildfires killed 173 people and destroyed more than 2,000 homes in Victoria state.
Hundreds of residents spent Thursday night in dozens of evacuation centers in the Blue Mountains and elsewhere in New South Wales. Most were unaware of the fate of their houses.
Temperatures west of Sydney hovered around 23 degrees Celsius (73 degrees Fahrenheit) on Friday -- about 10 degrees Celsius (18 degrees Fahrenheit) cooler than on Thursday. Gentle breezes had replaced strong winds.
"It's calmed down a lot since yesterday, but make no mistake: We've got thousands of kilometers of fire front that we are faced with trying to deal with," said Rogers, of the fire service.
"This is absolutely far from being over," he added.
Press; By KRISTEN GELINEAU]
Associated Press writer
Rod McGuirk in Canberra contributed to this report.
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