Thanks for the response Andrew. And yes...the part of the block I am referring to is above ground. The block that is below ground remained dry. This is a new home and the gutters have not yet been installed which may explain some of the problem. The builder still assures me everything is fine. Should I insist he replace the drywall that is applied directly to the block ? If he installs studs he will also have to move the steps 2" or we will lose 2" off the width of going down the stairs...which will also affect the door at the bottom of the steps. This will probably delay the finishing of the house by a week or two but I dont want to run into any problems a few years later and realize I could of corrected these problems upfront.