I encountered this very problem after applying an URL Rewrite rule to redirect the traffic from http to https as per this solution:
Https redirection in web.config
This is causing an error because my solution is configured with a local iis with a startup project url.
What seems to happen in this case is that the project url cannot be resolved in iis 7.5 because the https binding is not on the host name but rather on a blank hostname.

The other way to diagnose this, is if you go into your projects properties, web tab, and try to change the project url to https instead of http. You will get this message as if your setup was wrong inside iis (but in fact its working and iss is serving the link).
The local IIS URL https://xxxx.com/ specified for Web project xxxx has
not been configured. To keep these settings you need to configure the
virtual directory. Would you like to create the virtual directory now?
What I ended up doing, is exclude the https redirect rule to be applied in the local development url.
<rewrite>
<rules>
<rule name="Redirect to HTTPS" stopProcessing="true">
<match url="(.*)" />
<conditions logicalGrouping="MatchAll">
<add input="{HTTPS}" pattern="^OFF$" />
<add input="{HTTP_HOST}" pattern="^local.development.com" negate="true" />
</conditions>
<action type="Redirect" url="https://{HTTP_HOST}{REQUEST_URI}" redirectType="SeeOther" />
</rule>
</rules>
</rewrite>