I need new siding. What is the best choice considering cost, energy and sustainability?
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Also I'm not sure how to replace the siding. The current siding is pressed wood sheets (4x8). Some are warping and have gaps that water can get in. They were only attached on the sides, no nails in the middle of the sheet. Probably done in the '70s. When replacing my doors, the contractor said there is no weather barrier under the current siding, "just attached right to the frame" (not sure what that means). He recommended leaving the current siding in place and wrapping
Oh, boy... Your question provides a bunch to discuss and consider.
Covering up mold and rot is NOT a good idea. Any contractor who recommends this to you is the wrong contractor. Before you make any decisions on how to proceed, you should do an inspection of the wall cavities at the suspected points of water intrusion. Those areas are typically under windows and areas of concern based on visual inspection.
By opening up a few of these areas you can determine what is actually going on. If you have mold and rot, covering it up is not what I would recommend. Does it happen in reality? Sadly, every day. You should be aware that even if you sold the house in five years and did not disclose this to the buyer, you would be liable if the buyer discovered you failed to disclose a known defect such as this.
The contractor was correct in saying it would be fairly expensive. Due to our 1995 energy code in Minnesota, there were a ton of homes that were constructed improperly, which caused the wall cavities to mold. I don't want to scare you, but there were stucco houses that cost north of 200K to fix. These were extreme cases, but mold can get ugly quickly.
When you do the physical inspection you can determine what insulation you currently have. If the home was built in the 1970s, I am assuming you will have an R-13 fiberglass insulation. Of course R-13 insulation is not up to par by today's standards, but keep in mind there are tens of millions of houses out there that have R-13 walls or less -- or none. That being said, the decision to increase insulation is something to consider, but gets complicated very quickly.
Some insulation options
If you end up removing the existing cladding to tend to mold and rot issues, you can insulate from the outside of the house with R-13/19 fiberglass or various other options and then use an upgraded exterior sheathing like the DOW 1/2" foam to add an additional R-3 or so.
If there is no insulation and you are not removing the cladding, you can hire a home foam insulation contractor who can spray a soft compressible spray foam that expands into each wall cavity. If you do this, I would NOT recommend adding additional insulation over the OSB sheathing. The reason is kind of technical, but it has to do with what surface of the wall becomes the hot/cold surface, and you will be trapping OSB between two layers of insulation that might be creating the conditions for mold.
If you have fiberglass insulation and you are not removing the existing cladding, you might consider adding rigid foam insulation over the existing cladding, provided there is no poly between the drywall and the studs. Assuming the house was built in the 1970s, this should not be the case.
Keep in mind that changing the exterior wall thickness or replacing the sheathing will most likely require you to reset the windows. This means removing the interior trim, de-installing the window, flashing the window properly, resetting the window, and in the case of a thicker wall, adding new interior extension jambs that allow for the additional thickness of the wall. Then the question becomes, if you are resetting the windows, are they worth resetting?
Are you starting to sense the can of worms here?
Condition of existing sheathing
If there is no mold or rotting and the existing sheathing can be secured properly, then you probably would not want to take it off. Basically I am understanding the existing sheathing is 4x8 sheets with a board and baton type trim. Once the batons are taken off, you can spot-repair the areas that need repair, caulk and tape the gaps and then wrap the house with a housewrap product like Tyvek.
There are as many differing opinions as there are options on cladding.
If you are moving in five years, you might want to keep it simple and use vinyl. My green building cohorts will cringe, but vinyl is really turning out to be a greener product than originally thought. The main advantages, of course, are price and low maintenance. We use a vinyl made by Abtco that comes with a 25-year fade warranty, which is important in places like Chicago where vinyl gets the snow fade.
I would not use a wood product unless it's something like LP Smart Siding made from young growth trees and treated with zinc borate to not rot or be infected with termites. Wood products will require painting every 5-10 years. As mentioned above, snow fade is tough in places like Chicago.
Metal is great; it is made from recycled materials and will be recycled when it comes off the house 50 years down the road. The downside is the price being more expensive, but it holds up great and is long lasting.
The cement board products perform well and are very popular.
They are typically slightly more expensive in price to the LP Smart Siding, and will perform about the same. They also require painting -- regardless of what anyone tells you.