A gunman who fatally shot another man at Kotara South was heard by a witness to say "I love you" and a woman's name, before turning the weapon on himself.
Police were called to the Blackbutt Parade residence shortly before 5pm on Saturday, following reports gunman Warren Browne had fired shots.
When officers arrived they found the bodies of two men with gunshot wounds. One was lying outside and one was inside.
A NSW Police spokesperson said both men were 42.
Several residents of the quiet cul-de-sac were too shaken to comment on Sunday.
The only indication of the violence at the scene - a small flat attached to a modest house - was a shattered glass door, off its hinges and propped against the wall.
A white Corolla in the driveway hadn't moved.
Ian Robertson has lived next door to the residence for about 18 years and said a new female tenant had moved into the flat about a month ago.
He said he had just returned home from grocery shopping when he noticed a man he had never seen before standing out the front of the property.
He said he had just brought in the last of his bags when he heard a volley of three loud shots, which he said sounded like they were being fired from outside.
"I heard bang, bang, bang and at first thought it was the gas heater going off," he said.
"I ducked inside and heard a rattle, crash and bang inside the house and then heard her scream.
"He came out and he said 'I love you' and a name and then I heard a shot. I knew it was over."
Mr Robertson called the police. He said the gun appeared to be an M16 rifle, but the barrel looked too thick.
"I did not sleep last night," he said. "I was thinking 'Why did he do it?' He should have talked or thought about it."
Peter Graham has lived diagonally opposite the residence for 62 years and said he recognised - but had never had a conversation with - the new female tenant and a man who visited occasionally.
Mr Graham said he was inside and heard two loud shots close together and a third as he approached his front door.
He said he went out onto his front verandah and looked to the right, before a sound he believed could have been a fourth shot drew his attention to the left, towards the house.
He said he saw the gunman, who didn't look familiar, holding a black firearm.
"I saw him cock the gun, look up the street [away from me] and then walk back in front of the car," Mr Graham said.
"He sat down, put the gun in between his legs and then looked up and saw me.
"He was calm, so calm. He was not aggro, not boisterous, he just looked at me.
"He started rising and raising his gun so I took off.
"I thought he was going to shoot me."
Mr Graham said he was on the phone to Triple Zero when he heard another shot.
He said he felt "very sorry" for the woman.
"No-one needs to go through that. It's a disgrace that someone's come and taken someone else's life."
Erin Arnott lives in the "quiet" street with her daughter, four, and said it was "eerie" driving past the house.
"I was already looking to move elsewhere prior to this [for unrelated reasons], but this has pushed me to the point now where I'm on a mission to find a new place."
A NSW Police spokesperson said Lake Macquarie Police District detectives were treating the incident as a murder suicide.
Crime Stoppers: 1800 333 000. Lifeline: 13 11 14