Stucco Paint Water Damage
One of the worst things you can do,
is paint stucco. Most paints don't allow the moisture to evaporate out
of the stucco and any moisture that gets trapped in the stucco can
easily start to do damage like this to your home.
If you look closely at the picture, you will notice that there isn't any stucco paint water damage above the ledge near the window opening. Both sides of the window opening aren't damaged at all.
The stucco paint water damage that were looking at here, was probably caused as moisture accumulated on top of the shelf or ledge. After enough moisture accumulates on the ledge, the easiest path for the water to follow, would be down the exterior wall that is now damaged.
The painted stucco wall isn't going to let enough moisture evaporate through the paint so it remains trapped for long periods of time, eventually separating the painted stucco from the unpainted stucco.
Home Repair Tip: Remember, the first step to any home repair is to fix the culprit or the problem area and in this case, I can't think of anything that would prevent moisture from eventually seeping into the window shelf or ledge area.
You could simply scrape off the flaking paint and repaint the area, but eventually you will be faced with the same problem.
If you want to get rid of the problem entirely, you could sandblast or water blast all of the paint off of the building and then reapply a new finish stucco coat to the exterior of the building, but this could be extremely costly.