Seven properties were evacuated when the hole, around 50ft wide, opened up in Magdalen’s Road, Ripon, last night.
Emergency services have spent the morning at the site, which is partially cordoned off.
Resident Frances O’Neill, who works at nearby Fountains Abbey, said she was woken by a “tremendous noise” and almost fell in when she went out on to her back patio to investigate.
She said: “I was just going down the steps into my garden and I put a foot down and then I realised the steps were moving, or had gone.
“I turned around and grabbed hold of a pole at the side and pulled myself back up and went quickly back into the house.
“I think luck was on my side earlier this morning.”
Fire officers directed residents to the pub over the road where Mrs O’Neill said she had a stiff drink.
The hole was mainly in the back garden of her next-door neighbour Ben Bramley, 43, a project manager with bookmakers William Hill.
He was falling asleep when his partner Adele Richardson woke him to say there had been a “commotion” in the back garden.
He said: “It sounded like a land slip, there was not a real thud or a big crash.”
Mr Bramley investigated and found the “absolutely enormous hole”.
He said: “It took out the entire back garden, from 10ft from the back door to the garage. It has taken a big chunk of land.”
Mr Bramley, father of 17-year-old Joshua, said Ripon was known to have gypsum deposits below which, when they dissolve, cause underground voids and then sinkholes.
Two years ago, only 300-400 yards away in Magdalen’s Close, a house had to be demolished after a sink hole formed, he said.
Emma Wood, 43, whose home backs onto Mr Bramley’s house, said she and husband Barrie, 47, were in bed when firefighters evactuated the area.
She said: “I was in bed and at 1am there was a knock on the door from the fire brigade who told my husband that we need to be evacuated because there was a large hole in the neighbour’s garden.
“We grabbed a few bits, grabbed the dogs and went over the road to the pub where the fire brigade told us we needed to find somewhere else to stay for the night.”
She added: “Last night my husband said it was a shame because he liked living there. I don’t know if that was an indication we might move, but I don’t know who would want to buy the house.”
Residents in three of the seven evacuated homes were allowed back while four occupants were advised to move out.
Fire station manager Ben Cairns said three people were put up on camp beds last night by the fire service, while others stayed with relatives or in hotels.
He said: “It could have been worse. If it had been any nearer the properties we would have seen structural collapse or damage, bearing in mind this is a row of terraces, who knows what the extent of that could have gone.”
After the 2014 event the British Geological Survey said gypsum under the town had dissolved to form a maze-like cave system.
It said in a report that sinkholes appeared in Ripon every two or three years in the 1980s and 1990s but there had not been any reported in the seven years before the 2014 event.
The organisation said there were a number of possible triggering mechanisms, relating to action of water underground.
Harrogate Council said its chief building control officer had been to the site. A spokesman said: “The immediate danger to the public has been removed and the situation is now under control.
“The cause of the incident is still to be confirmed. Whilst there is no visible damage to the main properties, we are looking at bringing in specialist engineers as soon as possible to assess the situation.”
He said the families from the seven evacuated properties had spent the night in a rest centre at Ripon fire station.