Here's the scenario:
A user who tries to create a local file and encounters this error. They cancel it and re-try it again and still generate the same error. Immediately, they think it is a network issue because that's what the warning is saying "This could be due to a network problem. You can try again or contact technical support."
I got the call from the user and I tried to resolve this issue remotely (or in person sometimes). I asked them to reproduce the issue and notice they already have a local file previously created in the local drive and therefore Revit asked if you want to "Overwrite existing file" or "Append timestamp to existing filename" like the image below. They chose the latter. This is where they got the same warning again.
There is a known issue that if someone has made a new central file and replace the old one. The user who attempted to make a new local file but choose "append timestamp" will fail. Basically, the file in the central location is not the same as the one from the user's local drive even though the filenames are the same. All you need to do is to overwrite existing file and Revit will make a new local file and you can continue to work from there.
Keep in mind that the local file is a place where a team member can perform the task on their end and then synchronize their work back to the centralized location. The central file should have the most up-to-date changes regardless.
In case you are still wondering what these 2 options do:
Overwrite existing file:
All the existing local file as well as the backup files will be deleted and replaced by a new one.
A backup of the (pre)-existing local file to be renamed with timestamp that allows you to develop an archive copy of the project locally.
I do think Autodesk can do a better job by alerting the user that the central model is replaced by a new one so they need to make new local file before continuing to work.