Questions & Answers about Þeir byggðu húsið nýlega.
How do we form the past tense byggðu from the dictionary form byggja?
byggja (to build) is a weak verb. Weak verbs form the past tense by adding a suffix like -di, -ti, or -ði to the root of the word. For this verb, the past tense suffix is -ði. Because the subject is "they" (plural), the ending changes to -ðu. Notice that the -j- from the dictionary form drops out completely in the past tense, leaving us with byggðu.
Why does the sentence use Þeir for "they" instead of Þau?
Icelandic has three words for "they" depending on gender: Þeir (masculine), Þær (feminine), and Þau (mixed group or neuter). By using Þeir, the sentence implies a group of men built the house. If it were a mixed group of men and women, you would use Þau byggðu húsið nýlega.
Is húsið in the accusative case here even though it looks like the subject form?
Yes, it is in the accusative case because it is the direct object (the thing being built). The base word hús (house) is a neuter noun. Neuter nouns are very friendly for beginners because they look exactly the same in the accusative case as they do in the nominative (subject) case. The -ið at the end is just the attached article meaning "the".
How does the word nýlega (recently) get its ending?