Are Water Weirds too weak for 3 3rd level characters?

Question

I like the idea of having a Water Weird within a small basin guarding a room of an ancient ruin or temple. Am I missing something or is a Water Weird no match for a 3rd level party because it stops being a threat as long as it's grappling a character?

Constrict. Melee Weapon Attack: +5 to hit, reach 10 ft., one creature. Hit: 13 (3d6 + 3) bludgeoning damage. If the target is Medium or smaller, it is grappled (escape DC 13) and pulled 5 feet toward the water weird. Until this grapple ends, the target is restrained, the water weird tries to drown it, and the water weird can't constrict another target.

Can it constrict the same target again?

Answer 1

First, answering your text questions:

Yes, it can constrict the same target again.

Actually, I think this is the point. The block states

and the water weird can't constrict another target.

And nowhere it says it can't constrict the same target again. This is also confirmed by this answer.

It can also just change targets

Until this grapple ends, the target is restrained, the water weird tries to drown it, and the water weird can't constrict another target.

From the Grappling section on PHB:

The condition specifies the things that end it, and you can release the target whenever you like (no action required).

So, the Water Weird can just release the current target, ending the grapple, and then constrict another target.

So, essentially

it stops being a threat as long as it's grappling a character?

This part of your question is off. That is not how Water Weird/Constrict is supposed to work.

About your title question

Your setup is kinda suboptimal for the Water Weird

As I read his stat block, he is supposed to be fighting under water. In particular, this feature

Invisible in Water. The water weird is invisible while fully immersed in water.

is completely lost in your setup. This should decrease the challenge of the party considerably.

So, I would say

Yes, in your setup, it might be too weak for three 3rd level PCs

But not for the reason you thought, but because it loses a major feature - permanent invisibility.

As a Side note on resistances and immunities

You didn't mention your PCs' classes nor their items. So, I would like to add a caveat to my answer.

Damage Resistances: fire; bludgeoning, piercing, and slashing from nonmagical attacks Damage Immunities: poison

So, if your party is too martial-based (e.g. a Fighter and a Rogue) and these martial PCs don't have magical weapons yet (which is likely by 3rd level), the resistance to physical damage can make the fight harder again, changing my answer.

As a final note

A CR3 monster has 700 XP on it. Against your party, it means a barely Hard (675 XP threshold) encounter. It's far away from a Deadly encounter (1200 XP threshold). So any CR3 monster shouldn't be that hard, even by book's definition - hard encounters mean there is a slim chance that a PC dies.

These XP thresholds can be calculated using Basic Rules or DMG section on Creating Encounters.

Answer 2

Some things to consider:

A small basin of water is hardly the optimal fighting conditions for a large elemental.

If you give it adequate water to function in it can stay in the water and be permanently invisible, this gives it advantage on attack rolls and the characters have disadvantage.

If the water is deep enough, 60 feet down starts getting unhealthy. If they are suffocating they will likely lose consciousness before they surface. Picture this

round 1: weird attacks with advantage, likely hits, target is grappled, weird swims 55 feet down lets the character go, moves 5 feet away in a random direction, character has no target likely swims for the surface, without a swim speed they get 30 feet with a dash.

round 2: weird swims up 30 feet attacks with advantage, I think you see where this is going, rinse and repeat. The player will most likely die without ever seeing his enemy, unless his companions intervene.

The weird is constricting the target. Holding your breath is a lot harder when a creature with a strength of 17 is squeezing the air out of you. Make them save (probably con or str) and on a fail start suffocation immediately rather than giving them their full held breath. Or if they were surprised, likely scenario against an invisible enemy, maybe they didn't have a chance (reflex save) to get a breath before they were pulled under.

All in all the water weird is probably overpowered in optimal conditions, but the environment you outline the water weird becomes little better than an animated potted plant.