Riding strong pre-COVID demand, and supported by generous federal and state stimulus packages, multifamily fundamentals were only modestly impacted by pandemic-related economic shocks in Q2 2020. The vacancy rate for our national sample of properties increased 60 bps year-over-year, to 4.6%. Average monthly rents posted a small year-over-year decline—the first in 10 years—falling 0.6%, to $1740.21. The supply pipeline remained strong, with stock growing a healthy 1.7% year-over-year.
Employment is an important driver of household formation and multifamily demand. After experiencing the longest expansion in history, the U.S. labor market saw a sharp downturn in Q2 2020 precipitated by the COVID-19 outbreak and subsequent containment efforts. In April alone, the U.S. economy shed 20 million jobs as businesses closed to slow the spread of COVID-19; the unemployment rate surged from a 50-year low of 3.5% in February, to rates not seen since the Great Depression.
The U.S. labor market is improving but at a slower pace than previously projected. Following three consecutive months of falling unemployment, we are now seeing levels of unemployment like those posted during the Great Financial Crisis (GFC). Though stimulus packages have mitigated the immediate impact of these unprecedented job losses on multifamily demand, the continuing spread of COVID-19, lengthening shutdown window, and reduction of enhanced unemployment will continue to erode multifamily fundamentals in the near-term.
We now expect a shallower, but later, bottom for the multifamily sector. Vacancy is expected to hit its highest point in Q4 2020, rising to 6.3%. Rents are expected to hit bottom one quarter later, in Q1 2021, falling 6.1% year-over-year. The long-term outlook for multifamily remains strong, with both rent and vacancy expected to recover to pre-COVID levels by Q1 2022.