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There are many construction and insulation approaches which allow a builder to create walls and ceilings with high R-values and low levels of air leakage, creating a much better envelope than is achieved with standard framing methods. Structural insulated panels (SIPs), insulated concrete forms (ICFs), double-stud walls, and advanced framing can all produce more energy-efficient buildings than the ol’ stick-built number.
The one thing they can’t do is to improve the efficiency of an existing house.
One of my first audit instructors stressed that we have to deal with the existing housing stock. People sometimes grouse that increasing fuel efficiency standards for cars is pointless, since cars last 5 to 10 years. Imagine how hard it is to improve the housing stock. Houses can last hundreds of years; moving that number is much harder.
As beautiful as all those building options are, they are only suitable for new construction. And 40 years from now we’ll be dealing with 80% of the same buildings. What are the options for radically improving their wall insulation?
Exterior foam board insulation is one of the few.
What is exterior foam insulation?
Exterior foam insulation systems require the installation of between 2 and 6 inches of rigid foam insulation (polyisocyanurate, EPS, or XPS) on the exterior side of the wall framing. The window openings, door openings, and roof edges are detailed to prevent water infiltration, and finish siding is added. These days, the type of siding is either vinyl siding (typically installed on furring strips) or stucco that has been back-vented for drainage.
This approach is can be applied to almost any existing house, although more complex house shapes require greater attention to waterproofing details. It’s an approach that can be used to make older homes more energy-efficient without harming their essential character.
Disadvantages of exterior foam
Let’s tackle the disadvantages first. What’s the main challenge of an exterior foam board system? Well, it’s outside. There’s a reason we trouble ourselves so much over the building envelope. It keeps out water, unconditioned air, pests and a host of things you don’t want in your nice cozy house. Anything you do on the outside of your house will be pounded by nature — and that’s where we’re insulating.
Moisture: Exterior insulation will get wet; it’s a given. The real challenge is not the moisture so much as finding ways to minimize any problems and allowing as much drying as possible. The disaster scenario is one where poor or improperly installed flashing creates an enduring leak into the building frame.
Pests: Insulation on the exterior may increase the chance of pest infestation. Bugs don’t eat foam, but they will burrow through it, searching for tasty wood pulp. Exterior basement and siding foam board need protection against pest infestations.
And what attracts the bugs? Moisture. Joe Lstiburek recently posted an article detailing the findings when they pulled apart his 15-year-old “beer cooler” barn, which was insulated with 6 inches of exterior EPS foam. Two simple errors in flashing fed moisture behind the foam board layer, providing life-sustaining moisture to burrowing bugs.
There was no structural damage (except maybe to Lstiburek’s pride) because of the water controls in place, but a lesson was learned.
How to prevent this: just as wood framing needs to be out of contact with the ground, so does exterior foam board insulation. Sufficient space from the ground, good flashing details, and pest shields will help prevent bugs. Keeping the insulation dry will discourage any pests from staying.
Ease of installation: This is a deceptive one. You’re installing standard built walls, then adding either weather-resistant wrap or a self-adhering vapor barrier membrane, foam board, furring strips, and then siding. It is a big project, but not a super-difficult one.
Periodically I’ll mentally gauge how long it would take my Dad and I to strip the siding and install foam board on my house. The difficult/not easy part is that you’d better nail down the water-control details. You need to avoid errors like reverse-lap flashing. You need to include sill pan flashing (to prevent water infiltration around doors and windows) and other details to control the water issues.
Cost: Another knock on this approach is cost. The foam board is all added cost over that of a standard wall, plus the additional labor cost. Like any high R-value wall insulation, it is partly offset by decreasing the heating and cooling loads, which leads to smaller (and less expensive) mechanical systems.
Greenness: Anytime you muck around with polystyrene foams, you’re at a green crosshairs (that’d be XPS and EPS). You’re saving energy and carbon, but doing so with a petroleum product. That said, polyisocyanurate, fiberboard insulation, and high-density rock wool board don’t have the same issue.
Advantages of exterior foam
Ease: Maybe not ease of use, but utility. External foam board systems are one of the only ways to radically improve the R-value of existing homes while retaining the house’s character. In New England, this is a consideration, especially given the age of existing houses.
Air leakage: Adding exterior foam board can significantly tighten the building shell. Once the foam boards are attached and taped at the seams, they form a continuous air barrier.
R-Value and thermal bridging: This is a huge plus. External foam board systems add significant R-value to a wall system. Adding 4 inches of XPS foam would add 20 to the R-value. Additionally, the foam stops thermal bridging. That thermal bridging is compromising the existing wall cavity insulation, meaning that the whole-wall R-value will rise by more than you might think (especially if you base your assumptions on the nominal R-value of the batts inside the wall).
As building and energy codes improve, alternatives to standard framed houses are being explored. An exterior foam retrofit may not be the greenest option, but it’s one of the best performing options for improving insulation in older homes.
Erik North, the owner of Free Energy Maine, is an energy auditor and home performance specialist in Westbrook, Maine. He is also the author of the Energy Auditing Blog.
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32 Comments
A not-so-foamy outsulation retrofit option.
The Larsen truss:
https://www.greenbuildingadvisor.com/blogs/dept/musings/all-about-larsen-trusses
http://www.builditsolar.com/Projects/SolarHomes/LarsenRetrofit/Larsen.htm
Larsen Truss
Truss systems are another great (and greener) option. I went on a wall system writing spree last year and covered them here:
Larsen Truss article at Energy Auditing Blog.
Oil feedstocks are the LEAST of it...
Most of the foam insulation made in the US uses methane or natural gas as the fundamental feedstock, not oil. While it's not normally done (due to the price & availability of natural gas), there are no technical barriers to making it entirely from biological-source feedstocks. Methane is methane, whether it came out of shale formation, where it had been stored for 100 million years, or out of a cow, rice-paddy, or swamp (with much a shorter carbon cycle.)
But it's the HFC blowing agents used in the manufacture some types of foam that present the much larger environmental cost. Eg: XPS and EPS use the same polymer (and thus the feedstocks), but all XPS in the US is blown with HFCs, while EPS is typically blown with pentane with less than 1% of the lifecycle greenhouse impact, amongst other environmental factors.
In Europe most XPS is blown with CO2, which has an even lower greenhouse impact than pentane. The resulting product has about the same R/inch characteristics as EPS of similar density, but it's more resilient to handling damage than EPS.
Thank you for the article
Thank you for the article touting the advantages of rigid foam for adding continuous insulation to retrofit projects. Without a life cycle analysis it is difficult to address the overall benefit of plastic insulation (including polyiso). Although they are made from petroleum, it is important to keep in mind that the product is not then burned avoiding the most significant environmental impact from petroleum. When I hear the 'non-renewable resource' argument against plastics, I always think the proponent is saving crude oil for more Happy Motoring.
Energy efficiency at the cost of health?
Having moved to a moist and humid zone 4A from a very dry 3B, I am stunned by the ubiquity of mold-filled homes. Whether they are shacks on the poor side of town or million dollar showcases, they all seem to be factories for musty air.
I shudder when I consider what might result from making these homes more airtight. My suspicion is that research would reveal issues similar in scale to lead poisoning. Already we know that at least 20% of asthma is causally related to mold.
Anecdotally, my wife and I have often been told that if we did not have allergies before, we would have them soon after moving here. Locals seem to think it is the climate; my experience is that traditional building practices are uninformed and simply not good, and yet they remain the standard: "Always done it this way, and never got a call-back yet!"
Increasing the R-value and air tightness of an existing building would be an improvement ONLY if the quality of the interior environment is not diminished.
Germany provides an example
Germany has the impressive goal of reducing the primary energy requirement of buildings by 80% by 2050 and to retrofit existing buildings at a rate of 2% per year. Here is a report from the San Francisco-based Climate Policy Initiative that discusses costs and energy savings, and resultant viability:
http://climatepolicyinitiative.org/wp-content/uploads/2011/12/Costs-Benefits-and-Financial-Support-for-Thermal-Retrofit.pdf
Questions for David McNeely
David wrote:"I shudder when I consider what might result from making these homes more airtight"
David, If you inherited an extremely airtight house with designed and calibrated ventilation...
and you could add intentional openings, flaws or perforations anywhere you wanted....
Exactly where do you think the "leakiness" should be?
If you could go back and "perforate" the air barrier...where would you do so?
Would you retrofit a few 1970's can lights for good measure?
Response to John Brooks
John,
I am not opposed to an extremely airtight house; in fact, I am building just that for myself—and it will include four inches of foam on the outside, and it will indeed have designed and calibrated ventilation.
But “designed and calibrated ventilation” was not mentioned in this article; hence my response.
I have an odd habit of visiting open houses, and I always take a flashlight with me so I can look in attics, basements, and crawlspaces. I am also sensitive to mold. From these investigations, and from talking to the builders themselves, it seems that around here tradition trumps informed best practice.
Most of the houses I’ve seen—at every price point—have significant moisture issues. The resultant bad air is mitigated somewhat by leaky walls. I am suggesting that making them more airtight—i.e. to limit the air exchange without replacing it with “designed and calibrated ventilation”—will likely increase the health risk for the occupants.
I propose that in energy retrofitting, a little bit of knowledge can be a dangerous thing.
Thank you for allowing me to clarify my point. Now may I challenge you? Do you disagree with the conclusion of my post, that a healthful interior environment should not be risked for the sake of energy efficiency?
On a personal note, I have never been a fan of can lights for primary lighting. Especially with an 8' ceiling, the harsh direct downlight makes people look ghoulish, and I never understood why anyone would find that desirable. So the answer to your final question is No. : )
thank you David
Thanks for clarifying.....I agree with you.... "a healthful interior environment should not be risked for the sake of energy efficiency"
Question for David McNeely
What specifically are you seeing at open houses, when you visit basements, crawl spaces, and attics, that you consider to be moisture problems?
Response to David McNeely
David,
Although Erik North may not have mentioned ventilation in this article -- making your comments appropriate -- it's worth mentioning that the GBA site strongly advocates in favor of mechanical ventilation systems. See, for example, Designing a Good Ventilation System.
Air Quality
David,
I strongly feel there ought to be something like a Hippocratic Oath for the efficiency industry. Specifically, 'First, do no harm.'
What's the point of anything we're discussing if it creates unhealthy buildings?
Examples for David Meiland
David,
Perhaps I should have said "open houses and job sites"—in 40 years I've worked in Oregon, Los Angeles, Minnesota, Baltimore, and Tennessee. I served an apprenticeship in both cabinetry and carpentry. I have mostly worked as a sub-contractor for finish and custom woodworking at the very high end, although I did spend a winter in Wisconsin wrapping a post & beam with SIPs (read: COLD!) and I many times ran jobs.
It is striking to me the variety of challenges builders face in the different areas. In MN I witnessed many examples of devastating consequences because the understanding of how moisture moves in winter was only partial. In TN moisture is an issue at all times of year.
Common around here has been to build a partial basement for utilities and laundry, surrounded by a moat of below-grade soil within a perimeter foundation that is not well sealed. This, combined with a failure to slope the grade away from the house (with annual precipitation of almost 50"!), results in significant moisture within the conditioned envelope—sometimes even mud on the floor after a rain. (And yet this isn't enough to warrant a disclosure!)
Even high-end new construction is not carefully executed. Simple things: I almost never see kick-outs at a roof/wall condition (and we get tropical downpours here). And truly problematic things: I rarely see separation between below-grade and above-grade reservoirs (brick, stucco), as evidenced by stain and mold extending above the plate line.
I recently looked at one exterior wall of a newly built house and counted six transgressions that could potentially compromise the envelope. In short, I could go on and on. Maybe I should start taking photos for a montage of ignorance.
If you’ll permit me, I think a fundamental problem is that contractors aren’t really required to know anything to become builders. I once took on a completely green friend as a carpenter’s helper, and was disappointed that he just didn’t seem to “have it.” Imagine my disgust when I learned he became a contractor the following year.
To Martin & All GBA Advisors & Contributors
Martin,
The service you provide to the building community is beyond calculation.
I had already read the referenced article more than once, as well as every other article and most blogs published here in the last 30 months or so. This website (along with Building Science.com) has been the primary resource for my continuing education. I recommend this site with enthusiasm at every opportunity, and I support it as a member.
Foam and Pests
Erik, I know Joe Lstiburek attributed the pest damage to his office to moisture infiltration but my experience here in the PNW is that Carpenter Ants are quite happy to burrow through and nest in dry foam which closely mimics the dead stumps they usually inhabit. Borate treatment is a much safer bet than relying on the absence of moisture.
To David McNeely
David,
I assume that the numerous moldy buildings you find are moldy because of a moisture wetting problem that persists long enough to grow mold. I am curious to know if you find a predominate cause for this moisture issue, or if it is from a variety of causes such as rain penetration, ground water, improper surface drainage, condensation, etc.
I can see one scenario that tightening up a house could remove drying ability that would otherwise mitigate moisture intrusion occurring from a variety of sources.
I can see another scenario that tightening up a house could be associated with added insulation, and together this leads to a condensation problem.
The second scenario would be an error in design or construction.
The first scenario assumes moisture penetration, and would be using leakiness as a "band-aid" to dry out penetrating moisture. The better solution would be to eliminate the penetrating moisture along with the leakiness.
But I am wondering which of the two scenarios I described is driving up the mold occurrence in general.
What about shrinkage?
Like many articles, this article says that exterior rigid foam can "form a continuous air barrier" and "the foam stops thermal bridging". No mention is made of the expansion and contraction of the sheets of rigid foam. Yet in a different Green Building Advisor article, I learned that the manufacturers of rigid foam state that expansion and contraction can be up to 4%.
If 4% doesn't sound like a scary number, consider that this could mean a 4" gap between two adjacent sheets of foam (96" x 4% = 3.84"). If we could reduce that contraction by 85%, we would still be looking at more than a 1/2" gap between two sheets of foam. I don't think we can expect to end thermal bridging, nor form a continuous air barrier, with this amount of movement in the product. I doubt that seam taping can survive intact.
So what is going on? Are the manufacturers overstating the problem (that could be a first)? Are the authors of all these articles unaware of the expansion/contraction figures? Are builders and homeowners just assuming that everything is dandy behind the siding or stucco? Or is there some other reason why the expansion and contraction of rigid foam isn't a serious concern for anyone considering this option?
Response to Derek Roff
Derek,
I am aware of the problem, and wrote about it here: Using Rigid Foam As a Water-Resistive Barrier.
My standard advice for those concerned about foam shrinkage: install two layers of rigid foam with staggered joints, and don't depend on rigid foam to be your air barrier or your WRB.
Too air tight but not enough. Not good
I finished a new build last year. 2" of rigid foam on the exterior with taped joints. Caulked and taped all sill plates, posts, headers from interior and 2lb spray foam inside walls. I saw the consequence of sealing the house really well but not quite 100% as the temps dropped below freezing. Water started dripping out of the soffit vents and from behind rain-screened siding above window/door flashings in a number of areas on the upper floor. A result of condensation from air leaks. I had done a blower door test before drywall and we thought we had all gaps closed. I took an IR camera to the suspect areas and saw cold spots in select areas where moisture was dripping through. Upon removing soffit, siding and foam (tedious work) in suspect areas we found wet (some very wet) areas where air was being forced through the envelop, most likely due to the stack effect, into the soffit cavity. The result of trying to make the house air tight accentuated the small leaks that missed our attention. Even after expensive repairs to the problem we are finding the leaks move elsewhere. Short of taking off drywall and redoing the entire upper floor it appears that trying to caulk & foam possible small gaps from the outside is a loosing battle. There seems to be a risk of trying to be too air tight in that if you do not get it 100% you make the small gaps emit high pressure moist air from the inside. I should note that I have an HRV system in the house running 24/7.
Just saw comment by Ron Keagle. Is there a possible fault in the design: 2lb foam inside+sheathing + house wrap + 2" rigid exterior + rainscreen + siding?
INTERIOR rigid foam insulation?
Has anyone studied (or experienced) interior rigid foam insulation, either in new or retrofit construction?
Retrofit would be greatly limited by fixtures/cabinets and generally interior space issues.
I'm mostly interested in this idea for new construction as I could see cost and ease of installation being lower than exterior (also, fewer structural and waterproofing issues potentially). It would also increase the cavity (batt or blown in) insulation by removing penetrations from the wall cavity
Thanks,
John
mineral wool rigid board insulation instead of exterior foam
The article briefly mentions mineral wool rigid board products as an option but does not provide much detail on that option. That is an option which is greener and resists fire, insects and mold more effectively than foam without the flame retardants and greenhouse gases. It allows the sheathing to dry to the exterior which is an improvement over foam. I have links to the buildingscience.com research on the subject at my blog covering our build with the rigid rock wool boards. You can follow our blog here http://agreenhearth.com/stone-wool-to-warm-the-heart-and-the-home/
@ Chris Ford
"The result of trying to make the house air tight accentuated the small leaks that missed our attention...There seems to be a risk of trying to be too air tight in that if you do not get it 100% you make the small gaps emit high pressure moist air from the inside."
Very interesting. Where is the moisture coming from? My first thought is that you say this is a new build. I'm wondering what's going on in the house. Are there residents yet? If so, are their activities producing an over-abundance of moisture? Or perhaps it's simply the lumber drying out and so the problem will eventually disappear. I once had a leak occur around a skylight (brand new build) that scared me but it disappeared after one occurrence. I surmised that it was the outlet for the moisture from drying lumber. Let's hope...
Additional info to Chris Ford's comments
I can atest to not getting it quite right can cause problems. In our super insulated earth shelter, I found that we had some very small gaps that were allowing warm air to trickle out into a cold, externally ventilated roof space.
Over the winter season the humidity that was escaping the house would condense on light fittings and ventilation mesh, and then, come the temperature drops, would freeze. It took me a couple of seasons to work out quite how this ice was forming.
Details, details.
So after taking the 'wall' apart and 're-building it' we had no more ice. The cause seemed to be that we had not taped the insulation / wood layers that made the wall up, and even though one could not spot any obvious gap, there was enough for the warm damp air to permeate to the cold space.
Foam toxicity and flame retardants
Although mold and green house gas potential are very important considerations, to my mind the bigger issue is one that doesn't get even discussed much: the fact that here in the US all foam insulation (EPS, XPS, spray) has halogenated flame retardants added to it.
This class of chemicals has been shown to be extremely toxic at very low doses, persistent, and bio-accumulative. For years we've been putting the stuff in furniture, carpeting, baby clothes etc.
Kudos to Alex Wilson for raising the flame retardant issue in a recent GBA post here: https://www.greenbuildingadvisor.com/blogs/dept/energy-solutions/making-healthier-greener-foam-insulation
The Green Science Policy Institute has additional information as well: http://www.greensciencepolicy.org/node/26
As "green" contractors, this puts us in a terrible bind: how do we recommend a product to our clients that is known to be highly effective from an energy standpoint but also extremely toxic to the environment and to human health?
The kicker is that the actual benefits of the flame retardant appear to be nil: the toxic smoke it produces actually makes fires more deadly: http://www.environmentalhealthnews.org/ehs/news/2012/burning-irony
When to start and how thick
Great article. Just what I was looking for. In Germany where I am originally from we had this for decades and it works if it is well done. I don't know why the term EIFS is not used in any of the discussions, but I guess that is what we are talking about.
I am actually gonna get this done to my house in DC this spring. I have a drafty old one with almost 10 degrees difference between top and bottom floor. Roof is new and well insulated, I just had the disgusting crawls pace dug out 3' and spray foamed 2" on all sides. Also have 1mm vapor barrier. All of this made basically no difference; except that the floor is not so cold anymore.
Next step: outside insulation. Plan on putting 3" on two sides. The other side is connected to another house. The fourth side -facing the street- is my first question. I cannot do more than 1" here. Does it make sense to do so little for so much money or am I better off spray forming behind the walls from the inside?
Also the contractor says he can do this work in the winter too. From what I understand, the glue sticks worse the colder it is outside. Is it better to wait till the spring?
Response to Tom Diefenbach
Tom,
Exterior foam installation does not depend on glue. The foam is usually attached with cap nails or with furring strips and long screws.
EIFS (exterior insulation and finish system) refers to a combination of exterior rigid foam and artificial stucco. If you want EIFS, the system works well. However, you can also choose from a great many other types of siding, including fiber-cement siding, vinyl siding, cedar shingle siding, brick veneer, and traditional Portland-cement-based stucco. All of these siding types can be used with exterior rigid foam.
Response to Martin
Martin,
Interesting. My contractor insists that using only glue will suffice. No nails etc. I was skeptical when he told me. Do you think I should insist on using screws etc.?
Also, what's your opinion on the 1" exterior insulation?
Thanks
Tom
Response to Tom Diefenbach
Tom,
If you are installing an EIFS system, the system may well use glue. Obviously you need to follow the manufacturer's instructions if you have chosen to install EIFS.
In your climate zone (climate zone 4), you can get away with only 1 inch of exterior rigid foam without any danger of moisture accumulation. More information here: Calculating the Minimum Thickness of Rigid Foam Sheathing.
Serious Disadvantage Left Out of Article
Rigid foam is a vapor barrior, and wrapping the exterior surface of the house can create some serious problems. By living inside the home (showering, cooking, breathing) we produce many gallons of water vapor every day. The insulation this article recommends is a vapor barrior, which would prevent the vapor from migrating out of the house. Placing this vapor barrior on the outside of the wall (the coldest place in the wall in winter) can cause this vapor to condense at a location where it cannot be seen until it begins to cause serious mold or wood rot.
There are ways to avoid this. I use open cell spray foam which traps air but lets vapor pass through. Another method would be a large enough dehumidification system to handle many gallons per day.
I live in a very small ICF home I designed and built. (This foam system is also a vapor barrier). Before adding a dehumidifier, the humidity averaged 90%. We had mold, lots of condensation on the windows, and the wooden window frames were damaged.
I am worried that many homes might have this problem, so for my clients I recommend wood frame walls with spray foam insulation and a vapor permeable building wrap. I realize this is not as easy on a retrofit as the idea you described, but neither is replacing the rotten wood and having to pay for mold remediation. A building is a system, and one must consider all the factors before making a change.
Richard C. MacCrea, https://www.facebook.com/MountainHousePlans
Response to Richard MacCrea
Richard,
Your post is a combination of half truths, misunderstandings, and falsehoods.
1. If you include an adequate amount of rigid foam on the exterior of your walls -- enough to keep the stud bays above the dew point in winter -- you won't get any condensation. More information here: Calculating the Minimum Thickness of Rigid Foam Sheathing.
2. No one should deliberately build walls with the idea that a wall should act as a dehumidifier. Deliberately encouraging water vapor to enter your wall cavities is nuts. During the winter, your interior should be warm and humid; outdoors is dry and cold. Keep those two environments separate, and everything will be fine. If you encourage moisture migration through your walls, you are asking for trouble.
3. If the interior of your house is too humid during the winter, there is a simple remedy: operate your ventilation system. That will reduce your indoor humidity level. More information here: Designing a Good Ventilation System.
4. The very high humidity levels in your home have nothing to do with a vapor permeance of the chosen insulation. The high humidity levels are a result of the airtightness of your home -- that is, the low level of air leakage through the building envelope. One should never build a small, tight home without including a ventilation system; and once the building is occupied, the ventilation system has to be used.
exterior rigid foam insulation
I've read nearly all the comments in this thread because my old home needs much insullation and weatherization. Winters are cold and summers are a little too hot inside but not nearly as uncomfortable as the cold bothers us in the winter. Now, I've already invested in dual-pane windows all around which made a difference, but windows alone aren't gonna do it.
Now I've read articles on rigid 2" sheathing, and seen youtube videos and all, but first of all, I don't understand why you would build up the exterior thickness over the studs, instead of simply spray closed cell foam in between the studs. When you add another 2 inch for the foam, which is then covered by another layer of 1/2 inch foam on top of it, then taped, then wrapped with Tyvek or similar wrap, you'll end up with an additional 2 and 5/8 girth added on the stud. Not only does this pose new problems for re-flashing all the windows, but the transition to the sill as well. In addition, something I can't resolve in my head is how the heck is the exterior siding going to attach itself to the house when there is 2 and 5/8 space before the fastner can find a stud?! What? You suggest using 4 inch galvanized screws? That's no fun at all, and the screws are going to compromise the wrap and foam boards, right?
My preference is to strip the old siding and replace any wood rot, then get the two part tanks and shoot closed cell foam in the wall cavity every 16 inch. This ensures all the walls, electrical outlets, sills and ceiling transitions are sealed tight with a vapor/moisture barrier which offers as good or better R value per inch as rigid sheets do. Then wrap the exterior with Tyvek and nail in James Hardi boards with a nail gun, or let a stucco contractor do his part and be done with it.
No need to spend a lot of extra money on foam fastners, and 4 inch galvanized screws for securing siding to the studs. Best of all, I preserve the original thickness over the studs and minimize the need for custom flashing around windows.
You know I'm not an expert, just a home owner, but I honestly don't see the logic in wrapping the house with rigid foam sheets. There is yet another evil which is sizemic movement. These foam sheets are not speced to be sheer walls and I would not bet that in a year or two the tape that ties all those seams is going to stay "air-tight", yes we have ground movement here in California and lots of it. In my opinion the shear wall is best sit directly on top of the wrap that's covering the studs and not displaced by another 2 and 5/8 of material.
Response to Farrokh Khodadadi
Farrokh,
You wrote, "I don't understand why you would build up the exterior thickness over the studs, instead of simply spray closed cell foam in between the studs."
The answer to your question is simple: when you install spray foam between the studs, you haven't addressed thermal bridging through the studs. A continuous layer of rigid foam goes a long way to addressing thermal bridging, and therefore has a disproportionately positive effect on the whole-wall R-value compared to any insulation installed between the studs.
For more information on thermal bridging, see:
Peter Yost: Thermal Bridging
Martin Holladay: Thermal Bridging
GBA Encyclopedia: Insulation Overview
Q. "Something I can't resolve in my head is how the heck is the exterior siding going to attach itself to the house when there is a 2 5/8 inch space before the fastener can find a stud?"
A. In most cases, builders install vertical 1x4 furring strips on top of the foam. These furring strips create a rainscreen gap between the siding and the foam, and provide an attachment point for the siding. Almost everything you need to know about installing rigid foam on walls is explained here: How to Install Rigid Foam Sheathing.
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