Uncertainty.

"skepticism from buyers." "Some believe that there is still some downward pressure in prices." "interest rates may be higher." "probably pay less in the long run." "might not have the buying power you have now."

That's a lot of skepticism, mays, probablies, and mights. And that's in your post.

To that, I'd add uncertainty about the overall job market. Uncertainty about their own jobs. Uncertainty about being able to pay for college for their kids. Uncertainty about whether their kids will be able to get jobs when they get out of school. And lots more.

Uncertainly about whether they qualify for a loan. Yes, rates are low, but they're not handing out loans like candy any more.

And to address your specific point. Try posing this to your next buyer: "This house is a really good value at $300,000 with an interest rate below 5%." 

Your buyer responds, "But I'm really concerned about prices continuing to drop."

You answer: "Well, they could. But interest rates could rise. It's possible that a year or two from now, if you buy today, your home might only be worth $250,000. You could be $50,000 under water. But by then interest rates might be up, so when you try to sell, you'd be out of pocket over $50,000 while interest rates could be in the 7% range."

Ummm. That's not really a compelling argument to buy now.

That's why buyers are waiting.