One airport official said he had been told "the plane simply dropped off the radar screen".
Eyewitnesses spoke of hearing unusual sounds coming from the plane before it crashed.
"It sounded quite loud, and then the sound stopped," David Luce, who lives 150 yards (137m) from the crash site, told the Buffalo News.
"Then one or two seconds later, there was a thunderous explosion. I thought something hit our house. It shook our whole house."
He described going to the scene of the crash and seeing flames up to 50ft (15m) high.
"The house was already flattened. There was no house, just a pile of rubbish and still burning," he said.
Dave Bissonette, emergency control director in Clarence, described the crash as a "catastrophic event".
"It's remarkable that it only took one house," he added.
"As devastating as that was, it could have easily wiped out that entire neighbourhood.
"The fuselage of the plane lies directly on the footprint of the house. It basically dove right into the top of the house from my perspective, and again I am no expert on recreations, but it landed on the house," he said.
Relatives of the victims have been offered counselling and support as they wait for news.
One of those believed to be on board the plane was Beverly Eckert, widow of Sean Rooney who was killed in the 9/11 attacks on New York.
BOMBARDIER DASH 8 AIRCRAFT
The Canadian-made Bombardier Dash 8 Q400 was delivered new last year
Q400 is newest member of the Dash 8 family
Twin-engine turboprop, mainly for short-haul flights
First flown in 1998, entered commercial service in 2000
Her sister Sue Bourque told the Buffalo News that Ms Eckert had been travelling home to mark what would have been her husband's 58th birthday.
"We know she was on that plane," she told the newspaper, although she had not received official confirmation, "and now she's with him."
Chris Kausner, whose sister is believed to have been on the plane, was forced to break the news to his mother, holidaying in Florida.
"I heard my mother make a noise on the phone that I never heard her make before," he told reporters.
Officials say the fire has been brought under control and the area has been sealed off.
An investigation into the accident is expected to begin at midday local time on Friday, when the site has cooled down enough.
Investigators from the National Transportation Safety Board and the Federal Aviation Administration are going to the scene.
Continental Airlines expressed profound sadness over the crash and said it was working closely with Colgan Air to "provide as much support as possible for all concerned".
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