There are thousands of homes/apartments around where I live that are about equally attractive for me to live at. Most sold by different sellers. Housing is fungible.
The claim that housing is fungible is absolute non-sense, though.
If it were, we wouldn't see such drastic market variations, even within relatively close geographic markets (in some cases, literally blocks away)
We also wouldn't see such an intense pressure on evaluating real estate before purchasing (because if it was fungible - it's all the same, right?).
I basically don't know where to go in the conversation if you can't actually acknowledge the argument in front of you, and just say "No".