This eroding archaeological site is called Niðri á Bakka or Kirkjugarðsbakki, English: Graveyard Shore.
Settlement remains can be seen in the eroding coastline, and according to the legend the settlers of Velbastað lived on this location, and since moved further up the hill in the medieval period.
On the West river bank an enclosure with a slightly visible ruin is situated. According to some archaeologists this is a typical abandoned medieval "Bønhús" or prayer-house and a graveyard.
The National Museum, Fornminnissavnið is doing archaeological reserach at the site this summer (2016) and hopefully some interesting results will show up.
See a model of the archaeological trench in our collection: http://goo.gl/BN4fjF
Google map location: http://goo.gl/HpYvp6
Overview photograph of the site: https://goo.gl/photos/ixMfud6SM2NrYcNy6
Model by Helgi D Michelsen