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Conditions: Balloon framed construction, house built in 1930, Southern Connecticut region Does installing a fire-stop or Fireblocking where the sill plate and rim joist meet, block airflow and promote rot in the walls where moisture may get trapped?

I have heard conflicting views as this may have become code in some areas, yet will create the risk of future rot in the walls.

I own a 1930 Tudor influenced , 2 story colonial in Connecticut. It was built using Balloon Framing construction, which left open voids on all sides, from basement to attic. I recently framed-in the basement and finished it as a living space. I inserted pink insulation in the “Balloon” cavities as far as I could reach above the sill plate, and closed the balloon voids with panels of drywall, to create a fire stop and minimalize heat escape. I am not sure if this will stagnate the airflow and promote rot in the walls of my home, or if there will still be enough airflow to let moisture out of the balloon voids behind the walls? Thoughts? Suggestions?

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If your main floor and second story are not insulated, I would say no you will not create an issue with rot. There would be enough air space for moisture to evenly dissipate.

I'm not sure I follow you on where exactly you installed some insulation. I'm assuming something like your sill plate is resting on your concrete foundation and the floor joists do not tie into the balloon framed walls, meaning you have access to 6" or 12" of the bottom of the entire balloon framed wall section?

Are the first and second floor refinished on the exterior walls? Insulated or air sealed? If not you probably have plenty of air leaks and moisture movement while the very bottom of the wall is insulated and 'sealed' up right now. ;)

Typically fireblocking is when you install horizontal cut-to-fit blocking in the stud wall cavity to prevent fire/smoke from moving from one floor to the next so easily. You did help firestop from basement to first floor, but the drywall should be 5/8" thick and mudded to be considered a firestop.

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If you close off the bottom of balloon framed stud bays, yes you will impede the flow of air from basement to attic. However, water vapor may still be able to escape through the sheathing, tar paper, siding, and paint. Old houses tend to breathe quite a bit and take a lot of work to really seal up. It would be hard to say how well sealed up your house is, who knows how it was built and what's been done since 1930.

I might be concerned that there may have been some minor leaks or seepage that were draining down the wall cavity to the sill. With the bays open, these might have dried without causing any trouble but with less air flow, might soak the insulation and rot the sill or bottoms of the studs. If there's any seepage like that you can probably spot some dampness after rain or some darkening of the wood.

You could pull some of the bats in the basement occasionally, especially after storms, and see if it looks like there's any trouble - dampness in the bats or the framing.

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