The "diary entry" format is not very immersive. It's hard to give believably the most immersive parts of classic prose - following given events step by step, line by line, each breath, frown and smirk. It's all a retrospection from earlier events of the day, compressed into a diary entry format, so it's never this detailed. This alone would probably be quite enough to discourage most authors.
Next comes the matter of fitting it in. The (meta-)writer must be a type to write one, and simultaneously interesting enough to be worth reading enough. Combining these two in a whole novel formatted as a journal is rare.
The format is stifling and gives little in exchange for the cost. You need to have it planned out in time - where a novel skips two months, the journal needs a filler. Where the novel has the protagonist striped of all possessions and locked up, the journal needs them to retain the journal. Where the novel has them keep a deadly secret that can never be written, the journal can't have it written down, or it would show them as reckless.
Still, the format is liked and is common as "fast forward" mode, as day summaries, as a retrospection on last days of a deceased. It is popular and a very powerful tool, but rarely used on scale of full novel - a chapter, a section, a retrospection, something to break the pacing - it's common to interweave short scenes of very intense action with journal entries of days preceding the events. It's not nearly as rare as you believe, it's just usually served as a side dish, not the main course.