The glorious city of God is my theme in this work, which you, my dearest son Marcellinus, suggested, and which is due to you by my promise. I have undertaken its defense against those who prefer their own gods to the Founder of this city, - a city surpassingly glorious, whether we view it as it still lives by faith in this fleeting course of time, and sojourns as a stranger in the midst of the ungodly, or as it shall dwell in the fixed stability of its eternal seat, which it now with patience waits for, expecting until "righteousness shall return unto judgement," and it obtain, by virtue of its excellence, final victory and perfect peace.
Augustine likes to write long sentences, I think. It is best to read this out loud to fully get the meaning. And he is referring to the city of God when he speaks or "it". So it is living by faith and it sojourns in the midst of the ungodly. And it shall dwell in fixed stability, but it is waiting with patience for that time.
I hope that makes it a little more clear. I had to read it thrice to fully grasp its meaning.