Can I house a home folder for an account on an external hard drive?

You can thank Matt Clifton.

You can indeed. First, make sure you have another, admin, account (you’ll need it if you’re unable to log into your main account). I’d strongly advise also making sure you have a backup of your home folder (in a third location).

Logged in as your original user, copy your home folder to the external drive (which should be Mac Extended format). Now go to System Preferences – Accounts, unlock if need be, and control-click on your account name on the left. Click Advanced Options. You’ll now be able to change the default “/Users/yourname” home location to the external drive (you can browse for it). Click OK. Log out and back in, and you’ll now be using the external home folder. You may want to check your apps (eg iTunes) to ensure they’re all using the correct location.

You can now delete the original home folder location.

If the drive gets dismounted, the system will recreate the home folders on the system drive. You may then need to reset your location in System Preferences.

via Apple – Support – Discussions – Can I house a home folder for an ….