It's not rejecting the account creation (you should be able to verify this by looking at your /etc/passwd
file), it's just telling you that the home directory already exists. This is expected behavior, documented in man useradd
Use DIR as the user's home directory, rather than the default
specified by the configuration file. If the directory does not
exist, it is created and skeleton files are copied.
If you want the home directory to be created from scratch just delete the current one (or rename/move it if you don't wanna lose the data within it), then do a deluser
and start again.