The house was well ablaze when emergency services arrived.
"Me and my brothers just sprinted out and ran over and were knocking and yelling at all the neighbours to get out because there was just burning ashes falling everywhere.
"I ran down the side of the house and it was so hot and all the ash was falling on me and I could see the lady asleep inside but the door was locked."
Watene said there was a lot of panic and shock as people woke and watched the flames spread, and wind carry hot ashes onto neighbouring properties.
"Even just standing on the driveway it was hot as," Watene said.
"It was pretty scary."
A large phoenix palm against the front of the house had caught fire, and flames spread to the wooden villa. Other neighbours who had been woken by the boys had gathered on the street and one man, who did not want to be named, forced the door open and coaxed the frightened woman out.
"She didn't want to leave," the man's sister told Hawke's Bay Today. "So my brother had to calmly talk to her even though people were yelling to pick her up and carry her, and the whole side of the house was on fire and spreading.
"Eventually she came down and he just led her by the arm away from it."
The woman was uninjured, but understood to be very shaken and upset. She spent the night at another neighbour's home. It was believed she was not insured.
Hawke's Bay police Constable Mal Jonasen praised the effort, which he believed had saved the elderly woman's life.
"It could have been fatal in a couple more minutes," he said.
Napier Fire Service first responding officer Graeme McFarlane said four fire crews arrived soon after the woman had been rescued and spent nearly two hours extinguishing the blaze.
"It was going well," he said. "It had raced up the tree and looked like a bit of fireworks actually. That whole front room was completely damaged as the fire was very well engaged.
"It was very, very lucky the house on the western side didn't ignite as well. We were quite concerned for that."
Mr Jonasen was called at 2am to guard the scene, and doused a couch and a fence that re-ignited.
Yesterday the house was cordoned off as fire investigators worked in the charred, blackened home to determine what went wrong.
CIB Detective Sergeant Dave Ley said the cause of the devastating fire was being investigated.
"We are currently investigating the source of the fire, but it appears to have started in the tree," he said. "There is extensive damage to the front right of the property. There is also smoke damage to much of the house."