Thanks for all the info. The house is seven years old and that is stucco not EIFS. Furtermore, the rust was limited to that area. A valley with a small gutter and kick out flashing was located above the area of concern. My guess is probably Ice damming and ice build up this winter saturated the wall. However due to our very dry climate the moisture is no longer detectable. I checked the area with my flir and moisture meter but got nothing. Any additional thoughts.

Mat