The bull market in vintage college pennants

March 6, 2014, 6:00 PM UTC

FORTUNE — Like most University of Alabama graduates, 55-year-old Fran Smith has a lot of pride in her Alma mater. A 1982 alumna, Smith has three children who are all Crimson Tide graduates as well.

“We’re talking Alabama, as in Crimson Tide! As in ‘Roll Tide’,” Smith eagerly explains.

So, in November, when the retired software entrepreneur came across a booth at a flea market in New York City selling vintage college pennants, she couldn’t help but ask if any from Alabama were available. The booth’s owner, college memorabilia collector Steven Melillo, said no, but said he knew where he could find some. Three weeks later, Smith received four framed vintage Alabama pennants in the mail, and Melillo got a check for $300.

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Smith is just one of a growing number of Americans yearning to relive their college days by buying a small, yet decorative, piece of them back. As the baby boomer generation comes of age with more disposable income to spare, many are willing to shell out hundreds — if not thousands — on something that reminds them of the glory days. Enter a boom in vintage college pennants, those flag-shaped felt things you often see people waving around at sporting events. They’re a small slice of the overall vintage pennant market, but that slice is growing, says Mike Egner, the author of the Vintage Pennant Price Guide.

“A lot of people consider college to be the best time of their lives,” says New York merchant Melillo. “When people come to my booth and see a pennant from when they were in college … It’s an emotional experience.”

Unlike other memorabilia like an old football program or university pin, pennants are uniquely desirable because of their ability to be displayed in houses and offices as decorations. Dating back to the early 1900s, pennants were originally commissioned as elaborate pieces of art that could be as large as 35 inches long. Around the 1940s, the item was reduced in size to become a popular stadium souvenir. Many did not treat them as collectibles and would simply throw them away after the game.

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Now, they are a growth market for collectors and fans alike. Older pennants are getting harder to find each year, both increasing their value and driving up demand, Melillo says. A quick search on eBay finds more than 1,000 college pennants are up for bids. Options range from a 1939 Duke University pennant for $500 to a 1930s miniature Smith College pennant for 99¢. For buyers looking for a more personal touch, settings like Melillo’s booth, secondhand stores or university bookstores are also seeing robust sales. Increasingly, auction houses are getting in on the game: Huggins & Scott Auctions in Silver Spring, Md. and Robert Edward Auctions in Watchung, N.J. sell college pennants alongside their expansive sports memorabilia collections. And the market for old college pennants is not limited to American college alums: Melillo says roughly 20% of his customers are Europeans looking for a souvenir from their trip that is easy to pack and representative of America.

The price of a pennant can depend on its size, age, and condition, but Egner says it is the illustrations on the item that seal the valuation. A standard Yale College pennant designed with the college seal, for example, will sell for much less than one that also has a picture of Yale’s bulldog mascot. Similarly, if a particular pennant is larger than the standard 12-by-30-inch size, the item can be sold for a much higher price tag, Egner adds. The collector owns a large 17-by-52-inch Princeton University pennant from 1910 that he thinks could be worth up to $800.

Yet most pennant buyers are driven by emotion, not value, which makes pricing tricky, says Robert Lifson, the owner of Robert Edward Auctions. Some pennant buyers are willing to pay anything depending on the strength of their connection to a team or school, he said. In 2010, for example, Lifson’s auction house put a Buffalo Federal League pennant from 1914 on the block with an opening bid of $500. The pennant of the short-lived baseball team was ultimately sold for $21,500 to a buyer who undoubtedly couldn’t live without the item in his collection, says Lifson.

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John Sabino, the owner of online vintage collegiate memorabilia company Collectable Ivy, says the prices some customers are willing to pay for university pennants are similarly “crazy.” Sabino, who says demand is up “across the board” from just a few years ago, says he does roughly $20,000 in sales a month; he notes that he once sold a Stanford University pennant from the 1930s illustrated with Stanford’s former Indian mascot for $500. His customers are nearly all alums of the colleges they are looking for items from, he adds.

Given the subjectivity of the pricing and demand for his pennants, New York’s Melillo says he has to rely on his gut when making purchasing decisions. After 20 years of collecting, he says he’s confident he can spot something that is rare and will sell well. The most valuable pennant he owns is a 1911 Brown University pennant that is more than 90 inches long. He considers the item to be priceless, but says he could probably get $3,500 for it if he found the right buyer.

Selling college pennants is now just a second source of income for Melillo, but as demand for the product grows, the 51-year-old hopes to retire from his job as a facilities coordinator at Yale to collect and sell college pennants full time. He plans to increase his exposure by getting a website for his side business, Americana Memories, up and running as early as this week.

“My friends think I’m nuts,” Melillo says with a laugh. “This has taken over my life, but I love it. It is a way to make money and to hear stories of all the different people that come to my table.”