Thirty years ago I built this house with western red cedar siding. Never sealed it a lick. On one south facing wall, which gets driving rain in the summer, the water has soaked it so that it is wet all the way through. (Here in Appalachia it sometimes stays wet and foggy for days, so even south-facing can stay damp). Should I have sealed the wood? I like the natural greying.
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Mr. Yaller, we live in different climates (I'm along the shore in SE CT.), so your situation will differ from mine. That disclaimer aside, here's a brief history of my experience with cedar siding.
Bought my house new in '85, clad in cedar clapboards. Used a transparent stain, restained it again in 1990. In 1993, the south side clapboards were in such bad shape, I ripped them off and replaced with new. (The original builder used galvanized finish nails, allowing the clapboards to curl and nails to rust. We used SS siding ring-shanks to replace.) In 1997, I restained the south side, as it was looking worn. Fast forward another 4 years, the siding is mildew-stained, and looking poor. We repainted the whole house in a solid color stain.
Lesson learned on cedar siding:
No protection at all = nice weathered look, but probable replacement sooner rather than later,( though yours seems to have done well.)
Minimal protection (transparent stain) = High maintenance (restaining every 3-5 years), but will probably outlast unstained siding.
Better protection (solid stain or paint) = Lower maintenance (recoat in ~10 years), though the weathered gray look can only be found in glossy photos of Architectural Digest, none of your house.
OBTW, as you know, south side takes a greater beating than any other, so plan accordingly. And if the siding is wet all the way through and stays that way, you could develop worse problems.