Fixing peeling paint
If peeling paint on your siding is limited to the area outside your bathroom, chances are that moisture is working its way through the wall and lifting the paint. Baths and showers generate a lot of humidity, and some of that water vapor is probably working its way through the drywall, insulation, sheathing and even the building paper. From there it continues into the wood siding, and it’s just a matter of time until the paint peels.
Correct this problem right away, not only so the paint will stick but because the moisture may cause mold to grow inside your walls, especially in colder climates.
The first step is to reduce the humidity in the bathroom. Weather permitting, open a window while you’re showering or bathing. If you’ve got a bath fan, be sure to use it and make sure it’s actually working. Let it run for at least 10 to 15 minutes after you’re done showering.
The second step is to stop the water vapor from moving into the wall. In moderate and cold climates, you normally install a sheet of plastic as a vapor barrier behind the drywall. In your case, it’s probably missing.
Instead of tearing out the drywall to install one, simply repaint your wall with a primer that’s designed to act as a vapor barrier (BIN primer sealer is one good choice available at most paint stores). Then apply a standard finish coat. In humid areas (see map), skip the vapor barrier and rely on the bath fan.
And third, let the wall and siding dry out for a couple of months during warm weather before prepping and repainting the siding.