Furnace flue condensation can occur if the flue is too large or if a new furnace is installed and it's not compatible with the old flue. Condensation also occurs if the flue has an air leak, which sometimes happens when then the exhaust flue and the cold air intake intersect.
Gas going up a chimney or exhaust flue contains water vapor. When the system is working properly, the vapor is forced out of the pipe before it condenses. If not, then the water vapor cools before it leaves the pipe. A combination of water vapor and flue gas can be corrosive, causing the inside of the flue to rust. If the flue is part of a chimney, the corrosive material can eat away at the brick and mortar.
An oversized flue causes too much air to circulate inside the pipe. This makes it hard for the warm gas vapors to exit the furnace. Instead of creating a downdraft, the flue brings in cold air. This pushes the warm air down, trapping it in the flue. As the warm air cools, condensation occurs.
New furnaces are more efficient than the older models. Much of the heat in older furnaces went out the flue, which kept the inside of the pipe warm and free from condensation. Newer furnaces channel more of the heat into the home. The flue remains cooler, inviting the water droplets to form.