"Home is supposed to be empty, or a copy of /etc/skel/. How should the operating system know what you want to put there?"
Aldebaran is telling you that /home/fred does not exist.
marto@Marto-Desktop:~$ sudo useradd fred
[sudo] password for marto:
Sorry, try again.
[sudo] password for marto:
marto@Marto-Desktop:~$ sudo passwd fred
New password:
Retype new password:
passwd: password updated successfully
marto@Marto-Desktop:~$ ls -al /home
total 12
drwxr-xr-x 3 root root 4096 May 12 15:05 .
drwxr-xr-x 20 root root 4096 May 12 15:04 ..
drwxr-xr-x 56 marto marto 4096 Sep 23 10:32 marto
marto@Marto-Desktop:~$ su - fred
Password:
su: warning: cannot change directory to /home/fred: No such file or di
+rectory
$ ^C
As previously stated useradd was not being called with the correct arguments to create /home/fred, which would have been useradd -m fred thus creating the directory and copying the files from /etc/skel.