If your profile didn't say you from Phoenix I'd swear that came off the south side of my own house... same stuff... same condition.
I see a lot of that around my area, mostly from the 70s/80s when wood started to become scarce and the quality went down.
I have a standard comment where I identify the area and then state that normal maintenance for this type of siding includes periodicly replacing or sealing any split boards and keeping all materials well painted to prevent damage.
It's one of those where I feel caught in a spot between my SOP's and a siding cotractor... SOP's say to evaluate to determine if the system is performing its intended function, contractor that comes behind me says it's all trashed, needs to be replaced and your children are going to die of mold poisoning if they sleep another night in the house.
Edit - just caught that this was a new house. That's too bad it's doing that already... I'd think the split boards should be replaced. Wow, that sun is hot down there in Phoenix isn't it? Maybe Al Gore is right
