Now that you mention it, I was on altitude hold.
Now how do I locate that leak?
Unfortunately, there is no easy way to find the leak--but, it can and will be found with a little perseverance!
First, you have to have a source for vacuum applied at the static port (tape over the other one). You can use a hypodermic syringe, but the absolute best source IMO is a brake bleeder kit such as the one sold at Sears with the Craftsman label. I believe the criteria used by the FAA is to pump up your altitude to 1,000 feet above current elevation and your altimeter should not lose more than 100 feet in one minute. If you can achieve this, you are good to go.
To locate the leak, begin by unplugging each instrument attached to the static system one at a time and plugging the end of the static tube beginning with the last instrument in the static system schematic. This way you can eliminate each instrument as the source of the problem working backwards from the end of your static system network. After you have checked each instrument, replace its static line. Work backwards or upstream from here back to the static ports, one fitting at a time. Remove the fitting and plug the line until the problem goes away. Eventually you will be all the way back to the T over the two static ports, but you will probably find the offending component way before this.
I recently had a pesky static leak and it turned out to be the RMI µEncoder. There probably aren't that many around any more, but for those of you who built them, the internal tubing will disintegrate with time. I replaced the tubing inside and the problem was solved.
Another good (quick) way to check your static system for integrity inflight is to pull the cabin heat full out with altitude hold engaged and if the aircraft pitches at all, you probably have a static leak. P.S. (Or you can observe the VVI and it should not move at all when pulling the cabin heat out.)