Yes, it appears that your wall tools and your basement tools are not working.
If you are in Sulani you cannot have basements, but that does not look like Sulani. However, it does look like there are buildings right there that look like they have some windows that go under ground/beneath the ground level? It could very well be just how it's looking to me, but I thought I'd ask about them. If so, that makes me wonder if you have Mods or CC in the game... Or did you download the gallery? If you do have Mods or CC, can you please move the Mods folder to the desktop, remove the localthumbcache.package file, and then enter a brand new save and see if the issue is present in the new save?