I agree vendors shouldn't have +1 items that early especially when it's supposed to be a refugee shelter.
What they should have is basic level Breastplates, Chain Mail, Splint Mail etc.
Blacksmiths upgrading items into +1, +2 or +3 should be a special rare instance instead of the main way to upgrade your gear. It feels more ARPG like Diablo than D&D. The main way to find your equipment should be to find it as loot from bosses or get it as a reward for a special quest. It would be nice to be able to upgrade your favourite weapon to keep it relevant for longer though.