As others noted -- Personality change in the elderly can easily be a sign of early dementia/Alzheimers; it can also indicate depression or even just hearing loss -- some older people get very angry and defensive because they just can't hear what you're saying. Please take him in for a fulll checkup and before you do, see the doctor separately, without granddad there, and tell the doctor your're concerned.
If grandad has not always been this grumpy and self-centered, then there is a change to his personality, and that signals a possible mental or emotional problem.
Dementia or deafness or depression aside, he may be angry and resentful at having other people care for him. Older people who were always able to cope on their own can be very angry at the change in their lives that makes them dependent on others. His anger may be with his own circumstances and weaknesses, not really with you, but he may view you and your family as interlopers in his home and as telling him "You're no longer capable." I know you haven't used those words, I know you're there to help and not interfere, but try to put your own feelings to the side and look at how he might view things after decades of being able to cope and thrive on his own.
If you meet that with your own anger, he will not get the help he needs and you will miss out on what could be the last years you may have to know him. (Again, assuming he once was an OK guy and this is all at least something of a change, or an exaggeration of what previously were unpleasant but better controlled traits.)
See a counselor or therapist who specializes in geriatric patients. Again, see this person first without granddad and then see if you can get grandad to go.
Also, does he have interests he no longer pursues? Did he once go to card games or golfing or church or volunteering or anything, and no longer goes, or says all his old buddies are dead or moved away? He may be bored and lonely for company from his contemporaries. See if you can get him to some kind of activity that would appeal to him. He may grumble but could end up shedding some of his anger if he has an interesting place to be that's not his home.
As for his home -- again, try to put your own anger aside and see things his way, even if you disagree with him. He lived there with his wife, and he misses her, and this was their space together. Now he has his daughter, granddaughter, grandson-in-law and a small child living there -- instant large family, all at once, with no chance for him to get used to having them in his space. I'm not judging here -- I'm just saying, see it from his perspective. Does he have places in the house where he can go to be alone? Does he have times when he can do as he pleases with no one around supervising, or at least with another person out of the room so he doesn't feel hovered over all the time?
He sees you wanting to change the home he's used to. You say, the carpet needs replacing, but he hears, "This carpet isn't good enough." You say, the siding needs replacing, but he hears, "The house that was good enough for you and your wife who's gone isn't good enough for us." Of course that is not what you mean, but that may be what he thinks your motives are. Is he wrong? Yes, but it's up to you to set it right. You can start by picking your battles -- I'd work on his anger and resentment before worrying further about the carpet and the siding. He is from a generation that did not articulate its feelings much -- especially not men. So he's not going to sit down and say, "I feel you are intruding, I feel you are telling me things aren't good enough, when you say X I feel Y...." You have to read that behind the lines.
Finally, think about whether he would do better and be happier if he lived in his home but had daily help coming in, and you moved out. It's not clear to me if he needs actual nursing help, but if not, there are services that provide people who "look in" on the elderly. If he needs someone there at night, there are services that provide people who spend the night. It costs but might be better than your family living with this tension.
If he is really in need of medical attention and a lot of oversight (as in, he should not be using a stove, he might forget a cigar is lit, he is very unsteady on his feet etc.), then he may need to move to an assisted living home. But if that is the case, be prepared for his anger and resentment to be greatly increased, because he may see the very suggestion as "Now you're trying to take my home from me." Again, not your intent, but that's how HE might see it. If you can hear that and not explode you've made progress.