Standing on Skutulfjörður in Ísafjarðardjúp deep, Ísafjörður is the largest town in Ísafjarðarbær. In ancient times the community was named Eyrarhreppur. Merchants settled there in 1569, and it became the key trading centre on the Westfjords (Vestfirðir) when the Danish trade monopoly was at its height. One of the oldest cluster of houses in Iceland stands at Neðstikaupstaður near the harbour. Most houses are from 1757-1784, but the oldest one, Krambúðin (built 1757), is one of the oldest in Iceland. Most of the houses are protected. A folk and maritime museum is located in town.

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