From a financial standpoint, as the answers already indicate, you'll blast a hole in your credit. You heard wrong that your credit won't be affected, or as affected as a year ago.
From a moral standpoint, no. You're only $10,000 upside down? Is that all your reputation (general and credit) is worth? And you don't say that you're financially distressed--just that you want a bigger home. That raises the question of whether you'd even qualify for a short sale.
Answer: No. Don't short sale your condo.
It's not worth it for $10,000;
it'll cost more than that if you SS it.
If you could rent your Condo, even for $100-$200 per month negative, you would be better off.
You may be able to write off the negative, talk to your taxman.
You would need a Lease Agreement in your hand when you talk to the Lender; but it's doable.
Good luck and may God bless
Happy funding, Rudi
Another option may be to lease out your condo. The banks will count a certain amount of the rent as income. You may be able to qualify for the bigger home that way. I agree with the other answers that short selling your condo will make it much more difficult to purchase a new home.
The bottom line is that if you go the distressed sale route, it's very likely that you will not be able to qualify for a loan necessary to purchase a future residence without a period of time necessary to repair your credit.
Your best approach is to get the facts and do everything possible to avoid a short sale of foreclosure. Being able to ake the best decision for your situation may come from having conversations with a reliable local real estate professional and an attorney.
Can you afford to make the payments? Would you consider renting to a tenant? Could you afford to sell it for less than owed and bring money to the closing table. It might be possible to close on a new house with a deep discount so what you lose on the condo can be gained in the new one...call a local Realtor and Mortgage Professional in your area. They will give you a free consult. A CPA could be a good reg also