Is the settlement level of a city the upper limit to magic item level that you can purchase in the city? The settlement level seems to max out fairly low for campaigns that plan on going to level 20, like Paizo says most APs will do. Requiring characters to find all the magic items they want seems like a bit of a crap shoot too.
I was thinking about making the settlement level the upper limit of magic items that one can find without much difficulty, but anything higher requires finding crafters who can make what you are looking for. You will probably have to pay a small premium and of course wait at least 4 days.
The other option seems to be to have the characters do the crafting themselves, but the problem there seems to be finding the formulas of a higher level to make the things that they want to make.
If cities in the local regions don't satisfy the needs of your party then you should be able to find what you need either through loot or through planar metropolis hubs. By the time you start getting up into the low to mid teens it shouldn't be impossible to find your way to those places to buy some crazy loot.
Extradimensional magic shops that suddenly appear where there was just a blank wall moments before.
Where did I read that?
Finding the formulae is going to be a constant problem in a campaign, unless the DM simply decides that above a certain level they are not available, and the only phat luut is going to come from loot drops from the monsters he places.
It all depends on the sort of feeling you want to install in your campaign - common magic, or rare and mysterious magic.