Questions & Answers about Húsið þar sem amma mín býr er rólegt og gamalt.
The base word is hús = house.
Icelandic usually puts the at the end of the noun as a suffix:
- hús = a house (no article)
- húsið = the house (neuter definite ending -ið)
So húsið means the house in the nominative/accusative singular, neuter. There is no separate word for the in this sentence; it’s built into húsið.
Þar sem is a fixed combination:
- þar = there (an adverb of place)
- sem = a general relative word (that/which/who)
Together, þar sem usually means where in the sense of “in the place where …”.
In Húsið þar sem amma mín býr…, the part þar sem amma mín býr is a relative clause describing the house:
- húsið þar sem amma mín býr ≈ the house where my grandmother lives
So here þar sem functions like English where, not like a demonstrative that.