Mike, unfortunately this is a story we have heard many times over the past year. To qualify for a short sale, the seller must be able to prove that they have insufficient income to pay the monthly payment and that they have no other assets. But if you do have other assets, the bank will want those. For more information on short sales, try reading this blog article: http://las-vegas-real-estate-experts.blogspot.com/2008_04_01
It may be possible to negotiate a deed in lieu of foreclosure if you only have one mortgage on the property. You will need to contact your bank's loss mitigation department and discuss that scenario with them.
And of course your third option is to walk away and let the bank foreclose on the property.
In any of these scenarios your credit will be adversely affected and it will be a full four years minimum under the current credit constraints before you will be able to purchase other real estate.
Have you explored the possibility of trying to rent the property out until the market improves? You will probably still have a negative cash flow, but perhaps that might be better than ruining your good credit if the negative monthly payment is not too high. If you would like to contact me at 702-596-7821, I will be happy to reach a property manager and find out what they think you might be able to get for rent on your unit.