a couple of weeks ago I noticed one of my cedar trees turning brown. Then I noticed a bunch of small snail looking things hanging from webs all over the tree. Closer inspection revealed a small caterpillar in side of a "shell". Now they are even on the sides of the house. What are these? What do I do about them? Will the trees come back or they dead?

These are most likely evergreen bagworms (not to be confused with webworms). Check the following link and see if this is what you have.

http://woodypests.cas.psu.edu/FactSheets/InsectFactSheets/pdf/Bagworm.pdf
You need adobe for this. Or go to any other searches for evergreen bagworm.

Wasp and Bt are your cure. If they are still feeding and not closed in the bag, hit them with Bt as soon as you can, today would be good since you missed yesterday. Once they enclose themselves, the Bt can't get to them and won't work.

The silk is strong enough to girdle the branch tips and the worms can easily defoliate a tree. In addition to spraying, take a sharp knife and carefully cut the silk along the top of the twig, don't just cut the bag from the twig, this way, you don't have a lot of twig dieback next year (don't forget to stomp the suckers flat that you cut off).

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May the forest be with you.