Yes, that is correct. The items will all stay, but you are unable to add anything else. If you remove something to try to add something else, it will not let you add anything until you remove enough things to get back down to the san's eso+amount of furnishings allowed..

You can move your stuff around in the house, but if you put it away it's irreversible until you get eso+ stats again.

It gets deleted ;]