Nick Woltemade fired Newcastle in front before Arsenal struck an equaliser on 84 minutes through Mikel Merino ahead of Gabriel Magalhaes' 96th minute winner.
Despite Arsenal only managing to find a winner so late in the game, Howe conceded Newcastle weren't at their best on the night.
He said: "I thought we tried. We gave everything to the game. It was really physical. I don't think we were at our best today being honest. Arsenal played very well. We had our chances in the game and we took the lead and we were desperate to try and hang on to that lead. Nick (Pope) made some good saves for us but it wan't to be and we conceded set-pieces at the end so disappointing.
"Early on in the game we didn't look our best physically. We looked jaded. We took the lead and sometimes you will have days, especially with the schedule we have this season, where you are not physically at your best and you have to find a way to win and we weren't able to do that. Martin Odegaard made a difference for them, he started to penetrate our lines more. We defended the set-pieces pretty well until the end.
"They are always a threat, they have got great players. I don't think we hit our best levels and then collectively you suffer. We were in the lead and we had what we wanted and we were looking to close the game down."
Rebuilding
Howe also admitted his team were now in a rebuilding phase.
He added: "To a degree, there is a player change for us but we can't us that as an excuse. We have to win with the players we have. It was great to have Nick (Woltemade) score and we did have other chances in the game. We have to take accountability for that and do better.
"Nick and Yoane (Wissa) are totally different players and we are never going to find another Alex (Isak) but we can find a way to be effective with them in the team. Great to see Nick get two goals so early in his Newcastle career."