Currently (at least that is how it seems) the Realm “levels” when you defeat certain bosses. It kind of makes sense, keeping in mind that at a later point it will be multiplayer and the amount of character and their level will differ to much to make the realm scale with that.
After that point new Enemies populate the different areas, parts of areas change and new loot drops.
The main problem here is the loot.
It is Tiered with steps of 10 levels; so T1 req. level 1, T2 req. level 11, T3 req. level 21 and I assume this continues on.
When you kill a Boss “earlier”, you start getting loot you can not use.
I am currently level 17 and only get req. 21 items which pretty frustrating.
It is not a huge problem, since I “just” have to get some levels.
But at this point this takes quite some time. I would assume at least an hour each.
The simplest short term solution would be to have the dropped loot tier only go up when the player (or at least one player) is maybe one level below the required level.
Another option would be to have the loot tables not completely swap the instant the realm levels.
Maybe the new Tier of items is possible after the Realm levels, but how likely they are to drop compared to the previous Tier depends on the Character level (of the character killing the enemy).
That way you can already start collecting the next tier, but still get items you can use.
EDIT:
Also as I am playing more now I am starting to notice that the jump in Enemy power is also way to big.
No Enemy needs more than two hits for me now and I am wearing full Mesh, so I should be able to take a bit more than that.
If I was 21 and could wear T3 Armor, that probably wouldnt be a problem.
But like this, getting to 21 will be exhausting.
I probably end up making a new realm just for leveling to 21…
I have the same situation, I am currently getting loot aprox 7 levels higher than I currently am!! I have multiple boxes full of gear I can’t use, but am affraid to sell or destroy, because it’s stats look incredible 
it feels like the percentages of higher teired loot are about the same as the lower levels so when you inevitably level the realm you have the same chance of getting t3 loot from a t1 area and i think if they made it so that the t3 still dropped but was a much lower chance the lower the level area it would make more sense to have realm leveling as currently it dilutes the loot pool and makes it harder to get the items you need out of the lower areas which makes farming feel frustrating.
for example you still have a few building upgrades and need pine to finish off the last one or two things, going back to the areas before warrick was killed to farm trees but see what else you can get on your farm path you should only have like a 5% or less chance of getting teir 2 items and later only have like a 2% chance of getting teir 3 items out of a teir 1 area that way the teir 1 items have the biggest chance to drop in the lower level areas and you can still still acquire your goal of how many items you need and still passively get items youll need later… with a few exceptions like clay which should always drop when shoveling dirt becuase it makes sense and immersion
OR have the system track what you still need to level your town up and not unlock the higher difficulty in previous areas until you no longer need those items or what gear you can use and dont unlock higher teir items in lower areas until you are high enough level to use the gear or close enough to give motivation to level up as a reward
where as right now im level 19 getting level 21 items in the shallows which doesnt make sense to me as im still trying to get clay as much as possible and beating the twins just made it even harder to get
Totally agree… I had the same situation… Don’t think I shoveled ANY clay since killing the twins… so it seems that Sacrament will stay unfinished 