It had blue stripes as well as red stripes, but the blue stripes were only on the bottom half of the flag, and it had only a few stars (either nine or sixteen).
The car parked in front of the house that was flying it had some Civil War stickers on it, so I assume it has something to do with the Civil War, but when I looked online I could not find any references to an American flag with blue stripes.
It would be worth x-posting this question to the flag aficionados over in /r/vexillology : surely if anyone knows, it will be them!
Can you recall more details about the flag? You say either nine or sixteen, does that mean they were arranged in a square grid? When you say the blue stripes were only on the bottom half of the flag, does that mean the last six or so stripes alternated white-blue-white-blue-white-blue? Or were there also red stripes in the lower half?
It sounds to me a bit like the Serapis flag but that doesn't quite match your description.
There are early version of the Confederate flag that has a few stars generally somewhere between 6 to 14. It has a broad red stripe on the bottom, a middle stripe of white, and then a another broad red stripe at the top. Perhaps it was some version of one of these. Like this? http://confederate-flags.org/IN%20PRAISE%20of%20Stars%20&%20Bars.html
Maybe it was one of the flags on this page? http://www.motherbedford.com/Flags33.htm