Hi. The pipe on the hot water heater is sweaty. The floor is moist and stinks. I am certain it is the cold water pipe going in to the water heater. Help! We discovered this when we replaced carpet in house and took a panel covering it, it is located in a back closet. Now the whole closet smells like mold! Any suggestions on why this is happening and any fix? Thanks!

Is it on an exterior wall ?

Condensation happens when very cold water pipe enters warm environment. I would suggest to install good (3/4") pipe insulation over both cold and hot water pipes. Also, insulate the wall pipes are in with wall insulation.

Yep, it is. I live in a double wide that has been bricked up. The brick has sheet insulation and an air lock, but the inner wall would have no insulation. Will get the pipe insulation, but pretty unsure how we could insulate the walls, as the hot water heater was placed in an area w/ about six inches or less room on either side and walled in with paneling at the end of a closet! It certainly would be VERY hot in there at all times. Should we vent the wall panel covering that area also, then, for more air flow/cooling maybe?

Yes, I was actually going to add it to my previous answer. I would suggest that you cut small vent on the bottom , close to floor, and another one below the ceiling for air circulation and temperature stabilization. It will help your problem a lot. Yes, it will be hard to insulate walls with w/h in place. But keep it in mind. Next time you have to remove the heater from the room, have the walls insulated.

Do you have ventilation vents on the door to the water heater closet ? Is the door facing living area ?

An other excellent answer by Milo, After getting some air circulating in there go to a plumbing shop and purchase a length or so of 3/4" Armoflex,(see image) and some cement to glue it. Armoflex is a black spongy material we use to insulate our water pipes with that comes in 5' lengths.
Split the Armoflex down the length and cement it back once the pipes are covered. Both should help with your condensate problem. And Mum, I too am a Southerner,
Love your signature!
Good luck, Tom

You both are so appreciated!
Okay, will share this info with the "man" of the house! The circulation and one type or another pipe insulation is definitely doable. I guess I wasn't really clear on how this water heater is located, someone did a poor job on location. Its in the end of the master bedroom walk in closet, just walled in with paneling, like an afterthought. (Water heater? Gee, Kimmy Sue, where we going to put that? Well, lets make that there closet smaller, its close to the big water closet,! ) So, its tucked back in thar!! :D:D