I'll make a wild guess and say that you have a /home directory on your root (/) partition and found it is filling up.
If you have another partition, you can mount it as home.
Otherwise, I think that what usermod -d does is to modify your home directory field in /etc/passwd. You may still need to move your home directory contents there. (However, I'm not sure, and I'm not going to test it on my system.) You might try moving your entire home directory (as root) and use the usermod command.
If every user has a directory in /home, you could do something like this:
Code:
for user in /home/*; do
mv $user /local/
usermod -d /local/$user
done