A combined air and water temperature conditioning system provides for the heating of potable water and for the heating and cooling of indoor room air in a compact arrangement of components. A domestic type gas water heater having a driven draft direct vent system accepts a modular air handler on its top. The air handler comprises a heating coil within a closed loop water system and a pump circulating hot water between the water heater and the air handler coil. A blower in the air handler passes room air across the heating coil to an air outlet from an air inlet. An insertable second coil connected to a heat pump or air conditioner is optionally provided for heating or cooling air being propelled between the air inlet and outlet.